July 3, 2014 / 9:51 AM / 4 years ago

CORRECTED-ECB to meet banks next week on health check disclosures

(Corrects reporter’s name at top of story to Eva Taylor)

By Paola Arosio, Gianluca Semeraro and Eva Taylor

MILAN/FRANKFURT, July 3 (Reuters) - The European Central Bank will brief Europe’s banks next week on its plan for disclosing the results of a landmark asset quality review, sources familiar with the matter said on Thursday.

The ECB faces a delicate balancing act as it tries to maintain the secrecy of its work to avoid any breaches of market disclosure rules, while not blind-siding banks with unforeseen capital demands that they could struggle to fulfil.

An agenda for a meeting on July 10 shows the ECB’s director general for Micro-Prudential Supervision, Jukka Vesala, will lead a three hour meeting to tell banks how the results will be disclosed.

The meeting will also cover other queries from the 128 banks undergoing the tests about the ECB’s review, including the way ‘challenger models’ are used to validate the internal models banks use to value assets that have no market valuation, like some derivatives.

“There are a lot of routine meetings to establish the methodology of the process and the meeting of July 10 is one of them,” one of the sources said. “The banks have a lot of requests and the ECB will give the methodology (for the results disclosure),” the source added.

A second source close to the matter said a meeting with chief financial officers and chief risk officers of the banks was scheduled in Frankfurt from July 8 to July 10. The ECB declined to comment.

The ECB’s asset quality review of the euro zone’s 128 most important banks will be followed by an EU-wide “stress tests” to see if the region’s banks have enough capital to withstand another crisis.

All results will be released in October. Banks have made extensive preparations ahead of the tests, including raising over 100 billion euros ($136.41 billion) in the nine months to April, shedding assets and writing off bad debts. ($1 = 0.7331 Euros) (Reporting by Paola Arosio and Gianluca Semeraro in Milan and Eva Taylor in Frankfurt; writing by Stephen Jewkes; editing by Laura Noonan and Tom Pfeiffer)

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