FRANKFURT, Aug 1 (Reuters) - The European Central Bank (ECB) will complete an assessment of top banks’ assets early next year, which will allow for the next round of so-called “stress tests” to start in May, a source familiar with the matter told Reuters on Thursday.
The ECB is due to become the single supervisor for euro zone banks and before it takes up the task it plans to conduct an asset quality review as part of a broader balance sheet review of the region’s 130 to 140 largest banks.
German regulator Bafin and the Bundesbank told bank executives at a briefing on Thursday that the asset quality review would be completed in February, a person who attended the meeting said.
The next round of bank stress tests - when the European Banking Authority (EBA) and the ECB will test banks’ ability to cope in a variety of economic scenarios - will then start in May, the person added.
An ECB spokeswoman said the timing still had to be confirmed, as a decision could only be taken once the legal text for the ECB’s new supervisory body - the Single Supervisory Mechanism (SSM) - had entered into force and its supervisory board was established.
The legal framework is expected to be passed by the European Parliament on Sept. 10 and will enter into force shortly after. Only then can the supervisory board be appointed.
The body is expected to start operating a year after that.
ECB Executive Board member Joerg Asmussen said last month he expected the assessment to start in the first quarter of next year and to be completed before the SSM takes over supervision.
ECB President Mario Draghi has stressed several times that political leaders need to come up with a sufficient backstop before the ECB can embark on its asset quality review in order to cover potential capital shortfalls.
So far, this issue is still not entirely solved. (Reporting by Alexander Huebner; Editing by Paul Carrel and Mark Potter)