FRANKFURT, March 11 The European Central Bank
will press banks to change the models they use to predict losses
and take account of its views on asset valuation if the ECB is
unhappy with their risk assessment, signalling an aggressive
stance in its review of the bloc's banks.
The ECB is putting the euro zone's 128 largest banks through
a painstaking review of their loan books before becoming their
supervisor in November in a bid to force them to come clean on
hidden losses and restore investors' trust in the sector.
Between now and August, teams of national supervisors and
auditors will check on average 1,250 credit files per bank -
significantly more for larger banks - against common guidelines
the ECB published on Tuesday. The total exercise will cover 58
percent of the banks' assets as weighted by risk.
A test to see how banks will hold up under certain shock
scenarios will follow over the summer and all results will be
released in October. Estimates of banks' capital shortfall range
from 280 billion euros to as much as 770 billion.
The tests are unprecedented in ambition - euro zone banks
have never before been measured against common thresholds, such
as a single definition of when loans become impaired and many
have never had their books interrogated in such detail.