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Banks should pre-empt ECB’s assessment

Posted at August 22, 2014 | Categories : News

Ahead of the European Central Bank (ECB) taking charge of the prudential banking supervision of the Eurozone’s largest banks in November, KPMG is calling for banks to pre-empt the potential direction of the ECB’s Comprehensive Assessment.

The accountancy firm describes the Assessment as “the biggest ever buy-side due diligence exercise”, with the ECB due to publish the results in late October comprising a Supervisor Risk Assessment, Stress Test and Asset Quality Review (AQR). The ECB has indicated that banks will have between six and nine months to address any capital shortfall after the aggregate results are made public at the end of October.

However, KPMG believes that the publication of the stress test methodologies and AQR should allow banks to figure out the potential impact of the Assessment.

The accountancy firm is therefore advising banks that believe that they might fail to take advantage of current favourable capital markets that have already enabled banks to raise €45 billion of Common Equity Tier One Capital between July 2013 and May 2014.

Francisco Uria Fernandez, co–head of KPMG’s AQR taskforce, comments: “The Comprehensive Assessment draws a line under the long standing market concerns on the quality of the balance sheets of the European banks.

“This is a unique opportunity for banks to focus investors’ attention on banks’ long-term strategies for profit growth and thereby continue the rerating of the European banking sector.”