Connect with us

Popular World News

ECB finds top euro zone banks underreport risk By Reuters

Oilfield firm Weatherford International files bankruptcy plan


ECB finds top euro zone banks underreport risk By Reuters

© Reuters. FILE PHOTO: Specialists work on a crane in front of the European Central Bank (ECB) in Frankfurt

FRANKFURT (Reuters) – Large euro zone banks have been underreporting their risky assets by 275 billion euros by using their own models to quantify potential losses, the European Central Bank said on Monday. Since the 2008 financial crisis, regulators around the world have been picking apart the internal models that large banks use to calculate how much risk is on their balance sheet and, in turn, how much capital they need. A five-year review by the ECB found that the euro zone’s top banks had undercounted their risk-weighted assets by 275 billion euros, or 12%, for example by underestimating losses in cases where a borrower goes bust. This lowered the ratio between those banks’ capital and their risky assets, a key gauge of a lender’s solidity, by 70 basis points on average between 2018 and 2021. “Banks are following through to correct deficiencies and fully comply with the requirements,” Andrea Enria, chair of the ECB’s supervisory board, said in a press release. The ECB said “further improvement” was needed in some areas, for example to ensure that the probability of default that banks assume is in line with long-run averages and sufficiently conservative. The way borrowers are rated also needed “to be amended or adapted”, the euro zone’s top banking supervisor added.
The ECB’s Targeted Review of Internal Models (TRIM) included 65 large banks across the euro zone. Germany was the most represented country with 14 lenders.
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Source link

Continue Reading
You may also like...
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *


To Top
error: Content is protected !!