November 5, 2018 / 1:20 PM / in a year

A dozen top euro zone banks may need more capital - ECB

BRUSSELS (Reuters) - A dozen euro zone banks, including some of the bloc’s biggest, should strengthen their capital positions, European Central Bank Vice President Luis de Guindos said on Monday, reflecting on the results of last week’s stress test.

FILE PHOTO: The headquarters of the European Central Bank in Frankfurt, Germany, September 30, 2018. REUTERS/Kai Pfaffenbach/File Photo

The ECB has said it would use the test results to set individual capital requirements for banks in a process known as Supervisory Review and Evaluation Process.

The central bank also said it would consider a 5.5 percent common equity tier 1 level as acceptable but de Guindos’ comments suggest that the ECB might be aiming for a higher level.

“Banks with core capital ratios in the adverse scenario below 9 percent display a weaker, though still satisfactory, capital position,” de Guindos told a conference in Brussels.

“These 12 entities, representing almost 40 percent of total assets of the sector, should increase robustness and enhance capital positions to face challenges ahead and will thus be closely monitored,” he said, calling the figures “indicative benchmarks rather than formal thresholds.”

The 12 banks include Deutsche Bank (DBKGn.DE), BNP Paribas (BNPP.PA) and Societe Generale (SOGN.PA).

Deutsche came out of the stress test with core capital of 8.14 percent under a so-called stress scenario, while BNP Paribas’s capital would fall to 8.64 percent and SocGen to 7.61 percent, the European Banking Authority said on Friday.

The bloc’s worst performer, Italy’s Banco BPM’s (BAMI.MI) would have capital of 6.67 percent under the stress test.

De Guindos said that only about 15 percent of banking assets are held by banks with a “comfortable capacity” to withstand shocks as their core capital would not fall below 11 percent even in a stress scenario.

Banks with core capital between 9 percent and 11 percent display “reasonable” degree of resilience and account for 45 percent of total assets, de Guindos said.

Reporting by Francesco Canepa; Writing by Balazs Koranyi. Editing by Jane Merriman

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