January 14, 2014 / 5:31 PM / 4 years ago

Stress test won't ask for govt debt to be marked-to-market -ECB

FRANKFURT, Jan 14 (Reuters) - European banks will not be required in upcoming stress tests to adjust their sovereign debt portfolios they hold to maturity to reflect current market values, the European Central Bank said in a letter published on Tuesday.

The issue of how banks’ sovereign debt exposure will be treated in this year’s balance sheet assessment by the ECB and the European Banking Authority is crucial for banks which loaded up on sovereign bonds during the crisis and are now concerned adverse test scenarios could get them into trouble.

On Tuesday, the ECB shed some light onto the matter.

“Sovereign exposures, both held-to-maturity and available-for-sale exposures, will be included in the stress test, although it is not foreseen that HTM portfolios will be marked-to-market,” the ECB said in a letter signed by its president, Mario Draghi.

The letter, dated Jan. 10, was addressed to Sharon Bowles, chair of the European Parliament’s economic and monetary affairs committee.

“Further details concerning the stress test will be announced in late January or early February,” it said.

Reporting by Eva Taylor and Paul Carrel

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