ECB Supervisors Endorse Bank Capital Plans After Stress Test

European Central Bank supervisors endorsed the capital plans of lenders who failed this year’s health check.

Of 25 banks across the euro area that didn’t meet capital-adequacy thresholds in the Comprehensive Assessment published in October, 13 still had gaps to fill after measures taken this year were accounted for. Those plans have now been signed off by the Supervisory Board, the Frankfurt-based ECB said in a statement today.

Five of the banks already have approved restructuring plans, leaving eight seeking fresh capital from investors.

“The Supervisory Board today endorsed the last set of capital plans from the banks where the Comprehensive Assessment detected a capital shortfall,” according to the statement. “The outcome will feed into the Supervisory Review and Evaluation Process decisions, which is subject to no objection from the Governing Council.”

The ECB became the euro-area’s top financial supervisor on Nov. 4 as part of a nascent banking union aimed at mitigating future crises. The body is now working to create a program of supervision for 2015, and SSM board member Ignazio Angeloni said this week that supervisors will be scrutinizing the business models of lenders that failed.

Final Approval

While banks that raised fresh funds before the bank-review results were published also had to submit plans, those were dealt with in an earlier meeting.

The ECB’s supervisory decisions still have to be approved along with the supervisory agenda, or SREP, by the Governing Council, the central bank’s highest decision-making body. Banks then have as long as nine months to carry out the capital plans. The council, made up of the heads of the 18 countries in the euro, has the right to object to decisions taken by the SSM. The approval of the SREP is likely only in early 2015.

Lenders including Italy’s Banca Monte dei Paschi di Siena SpA and Banca Carige SpA, Portugal’s Banco Comercial Portugues SA, and Austria’s Oesterreichischer Volksbanken-Verbund were shown in the results of the Comprehensive Assessment to need more capital. Monte Paschi, the worst performer in the ECB review, fell as much as 2.3 percent today.

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