Buba's
Dombret says ECB bank health checks 'already a success'
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[October 13, 2014]
By Thomas Atkins
FRANKFURT (Reuters) - A review of banks'
financial health led by the European Central Bank can be considered a
success before it is completed as banks have raised around 200 billion
euros ($254 billion) in preparation, a top Bundesbank official said on
Monday.
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The results of Europe's most comprehensive banking review will be
released on Oct. 26, giving the clearest picture yet of the state of
a sector that was pummeled during the financial crisis.
In anticipation of the results and without knowing how they will do
in the tests, European banks have taken steps to strengthen their
balance sheets, including raising equity, retaining profit, reducing
risk and selling investments.
"It's already clear now that the exercise is a success because
European banks have strengthened their balance sheets by around 200
billion euros," Andreas Dombret, in charge of banking supervision on
the Bundesbank board, was quoted as saying by German financial daily
Handelsblatt on Monday.
Juergen Fitschen, head of the German association of commercial banks
and co-chief executive of Deutsche Bank <DBKGn.DE>, said on Saturday
that Germany's banks were well capitalized.
Deutsche is one of the 130 top euro zone banks undergoing the ECB's
review.
The ECB hopes its 'comprehensive assessment' will banish fears about
the health of European banks and restore investor trust and revive
lending to euro zone households and companies - a key to getting
economic recovery back on track.
ECB President Mario Draghi said last week he expected bank lending
to pick up "soon next year", referring to a similar capital figure
to the one cited by Dombret that banks had raised since summer 2013.
Turning to the low interest-rate environment, Dombret said this was
a continued risk for banks by depressing earnings.
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Corporate bonds also posed a potential risk due to their overall
high valuations, which could fall in case of an external economic
shock or a sudden turn in interest rates, he said.
Echoing Draghi, Dombret said there were no signs that the currency
union was about to tip into a Japan-like deflationary scenario. Euro
zone annual inflation has been persistently weak and stood at 0.3
percent in September.
"We believe chances are very low of a deflation scenario in the euro
zone and do not currently see any typical signs of deflation, like
the postponement of large, private purchases," he was quoted as
saying by Handelsblatt.
(Reporting by Thomas Atkins, writing by Eva Taylor; Editing by
Jacqueline Wong and John Stonestreet)
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