FRANKFURT (Reuters) - Banks will get preliminary information on how they have fared in the European Central Bank’s landmark assessment of the sector a month early, so they can prepare a “market response”, according to an ECB presentation obtained by Reuters.
Investors are keenly awaiting the results of the ECB’s unprecedented review, which will force lenders to come to terms with any lingering weaknesses, adjust capital buffers and write off soured loans to regain the trust of investors.
The health checks started about six months ago and banks have so far been given little information about the outcome to prevent the chance of market sensitive information leaking out.
According to the ECB presentation given to senior bank executives in Frankfurt last week, banks will be get partial, preliminary results to “allow them to prepare market response”.
This means banks will have about a month to get plans in place for any measures they will need to take when the final results are published.
By classifying the results as preliminary, and not giving the full picture, the ECB ensures banks will not be obliged to disclose any shortfalls to markets under stock exchange rules - mirroring a tactic used in previous national stress tests.
After the preliminary readouts, banks have 48 hours to submit written questions to the ECB or national regulators and can air issues at a series of 2-3 hour meetings with banks, national regulators and ECB experts, bankers were told.
“(The) focus will be on the aspects of the Comprehensive Assessment that act as the key drivers to any capital shortfall,” the presentation said.
“The ECB will take into account comments at its own discretion,” it said, hinting that banks could influence the outcome of the review about a month before the results are due.
The ECB is open to receiving comments because it wants to avoid possible mistakes, which could undermine the credibility of the tests.
The ECB declined to comment.
The ECB is due to take over as the euro zone’s banking regulator on Nov. 4 as part of a broader push for European financial integration to avoid a repeat of the financial crisis.
Banks will get the final results of the ECB tests 48 hours before the official publication, for which the date has not yet been set.
The ECB will publish the results on its website, at the same time as national regulators will disclose how their respective banks faired, the presentation said.
Writing by Eva Taylor; editing by David Clarke