The European Central Bank is putting the euro zone's 128 largest
banks through a rigorous health check before it becomes their
supervisor in November and plans to publish the results in one go in
October to avoid market disruption.
Even if some banks were to issue positive news about the tests, that
might put pressure on other banks to show how well they compared.
"We see this as a problem," said Stefan Winter, head of UBS's <UBSN.VX>
German investment banking operations on Tuesday. "There are several
questions, which haven't been fully discussed yet."
Michael Kemmer, head of the German BdB banking association, pointed
earlier this year to a significant danger that some information
would come out between now and October.
"Such leaks would be poisonous for the financial sector. They could
unnerve investors and thereby run counter to the initial aim of the
exercise," he told Reuters at the time.
The ECB wants the review to help restore trust in the financial
sector, by pushing banks to come to terms with non-performing loans
and clean up their balance sheets so they are able to lend more
again to companies and households.
Sources told Reuters last month that the ECB was in talks with the
European Securities and Markets Authority (ESMA) to find a way to
deal with leaks and rumors.
"All options are currently being assessed," a central bank source
The ECB declined to comment.
The problem is that the health checks will be done in different
stages. Right now, more than 1,000 auditors and independent
specialist appraisers are trawling through trillions of euros of
assets, checking whether banks have set aside enough capital to
cover potential losses.
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A stress test will follow in May and June to check how banks hold up
under potentially damaging scenarios.
The auditors have been asked to keep test-related information to
themselves, but banks might be able to draw conclusions from the
data and additional information the auditors are requesting.
Some bank chiefs have suggested imposing a fine for leaking
information, similar to what the ECB did when it launched the manual
for the asset quality review (AQR) earlier in March.
Three sources with knowledge of the balance sheet tests told Reuters
at the time that recipients of the manual faced fines of 100,000
euros for leaking information early.
However, Andrea Enria, chairman of the European Banking Authority (EBA)
told Reuters earlier this month that if the AQR revealed material
discrepancies, banks would have to go public right away.
(Additional reporting by Andreas Framke;
writing by Eva Taylor;
editing by Ruth Pitchford)
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