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 The ECB's Single Supervisory Mechanism (SSM) is preparing to run the
rule over almost 130 lenders it will begin supervising from November
in stress tests billed as the toughest yet after previous exercises
failed to convince markets.
Banks have taken action on capital ahead of the tests and
strengthened their balance sheets by 104 billion euros in the nine
months to April through, for example, capital hikes or increased
provisions, the ECB said at the time.
"The markets are in a reasonably benign situation and there is
liquidity ready to be invested in banks, in equity or funding, if
the markets are convinced by the transparency exercise that we are
undertaking," Daniele Nouy, chair of the Supervisory Board of the
ECB, told reporters when asked if the ECB expected banks to carry
out more capital raising.
The ECB's review, aimed at encouraging banks to recognize losses on
loans or investments that have gone bad so that they can regain
investor trust and help the euro zone's fragile recovery, was well
on track to achieving its goals, Nouy said.
Speaking at a conference attended by chief executives and senior
officials from Ireland's main banks, Nouy said the SSM had received
over 14,000 applications for 800 jobs it plans to fill by the end of
the summer.
The ECB had said at the end of May that it had received 8,000
applications for SSM jobs, which have a top salary of 245,000 euros
a year and enjoy the low tax rates of those working for a
supranational authority.
NATIONAL SUPERVISORS ROLE
Nouy, formerly a French regulator, said the ECB would publish a
guide to the supervisory practices and methodology of the SSM before
it takes on the role of supervisor, to ensure transparency.
She added that national supervisors would play a "major role" in
this year's assessment and that the ECB would largely rely on them
to provide the risk assessment and Supervisory Review and Evaluation
Process (SREP) elements as its own systems need further
field-testing.
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One of those regulators, Irish Central Bank deputy governor Cyril
Roux, said he expected a first submission of an interrogation of
loan books as part of the SSM's asset quality review to be made at
the end of the month.
Roux, the country's head of regulation, also said that the Central
Bank would review its supervisory model for smaller banks, many of
whom are based in the Irish Financial Services Centre, Ireland's
venue for international finance.
Ireland's local banks, a rescue of which cost the state the
equivalent of 40 percent of annual output, will be subject to the
ECB's tests. Nouy said that while work was still needed,
particularly on troubled mortgages, the restructured Irish banking
sector was moving in the right direction.
"What had to be done has been done or is being done and the Irish
banks at the end of these reforms will be able to finance the
economy," she said.
(Editing by Catherine Evans)
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