ECB may increase capital demands for stress tests
The European Central Bank may increase the minimum regulatory capital that Greek lenders are required to hold to pass their latest stress tests, according to an Athens- based official with knowledge of the matter. The ECB may set the pass mark for adjusted common equity Tier 1 capital at 9.5 percent in a baseline scenario and at 8 percent in an adverse environment, said the person, who asked not to be named because the process isn’t public. In last year’s pan-European test, the pass marks were set at 8 percent and 5.5 percent respectively. Increasing the thresholds would mean that lenders may have to raise more capital from shareholders and bondholders. As much as 25 billion euros from Greece’s latest bailout has been earmarked to backstop the recapitalization of banks, and euro-area finance ministers said in August that senior bondholders may have to take losses before public money is used. Officials at the Bank of Greece and the ECB declined to comment on the regulatory capital requirements. Results of the current exercise, which also consists of an asset quality review, will be published around the end of October, according to the Hellenic Financial Stability Fund, the state-owned entity that is the biggest shareholder in the four lenders. Having lost more than 43 billion euros of deposits in the past year amid doubts about Greece’s place in the currency bloc, the nation’s banks are now kept afloat by almost 90 billion euros of emergency liquidity extended by the ECB.