Eurozone banks more fragile than expected

Some European banks underestimate the risks associated with their receivables.

This is the finding of the European Central Bank (ECB) at the end of a long control which judges the solvency ratios lower than indicated by the banks.

For nearly three years, the European supervisor has visited 65 establishments, carrying out 200 on-site visits.

It emerges that, on average, the supervised banks saw their “CET 1” hard capital ratio, a key indicator which measures the capacity to overcome a possible crisis, drop by nearly 70 basis points.

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The ECB says it has identified more than 5,000 gaps in the way targeted institutions assess their risky assets.

Deficiencies which mainly concern loans granted to households and businesses.

The institution, based in Frankfurt, does not give the name or the country of membership of institutions whose risks are poorly assessed.

But the control it carried out generates a revaluation of the assets of the establishments concerned.

This results in an overall increase of 12% in risky assets, or around 275 billion euros.

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However, this new valuation, which banks are integrating into their balance sheets, should not tip their solvency ratio below the minimum level required by regulations.

The ECB, which has played the role of supervisor since 2014, learned the lessons of the 2008 financial crisis and forced the big banks to take a stricter approach to risk.

As a result, they are now better placed to cope with a shock such as that caused by the Covid-19 pandemic.

The "

"

campaign

that the ECB has just carried out contributes "

", also welcomed Andrea Enria, chairman of the ECB's prudential supervisory board.