Friday , May 20 2022

The ECB plans a stress test in the banks' liquidity position "


"In 2019, we will do a stress test for liquidity," said ECB Managing Director Korbinian Ibel at a conference in Frankfurt on Monday. Supervisors will provide a simulated shock and examine how liquid assets evolve in this scenario. However, a new health check should not be as comprehensive as the recently completed stress test in Europe. "We are doing something very clear, which is very linear, so we can control a small group of people," said Ibel. The results should be introduced into the annual audit of the bank (SREP), but not directly in capital requirements.

The ECB directly monitors the 118 large eurozone banks, including Deutsche Bank and Commerzbank. For smaller institutions, national observers have a hat, but they agree with the euro bank. With a stress test, inspectors are trying to get an overview of how financial institutions can solve difficult situations. Ibel criticized the weakening of standards in lending. More and more money houses offered loans without a light for signing contracts or even without any conditions, said the banking expert of the ECB. The supervisor wants to carefully look at which institutions are the most aggressive. He doubted that the margins and risk provisions of many institutions were high enough to cover potential losses in the future.

Regarding the need for capital, the ECB does not want to meet with smaller banks, but rather with reporting obligations. "Not in frequency, but in depth," said Ibel. A lot could happen in a year, so information should be requested every three months. If something stands out, then you can look it closer.


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