November 2, 2018 / 5:15 PM / 18 days ago

Euro zone banks increasingly resilient, ECB says in stress test

FRANKFURT, Nov 2 (Reuters) - The euro zone’s bank sector as a whole would remain relatively robust even in the case of a severe economic downturn, the European Central Bank said on Friday, as part of a biennial stress test of the bloc’s top lenders.

Examining 33 of the currency bloc’s banks, the ECB said that their common equity tier 1 capital (CET1) would fall 3.8 percentage point to 9.9 percent in a so-called adverse scenario, staying comfortably above the 5.5 percent level it considers acceptable.

“The outcome confirms that participating banks are more resilient to macroeconomic shocks than two years ago,” ECB supervisory chief Daniele Nouy said in a statement

The ECB did not publish results for individual lenders and said there is no particular threshold it would consider as failing but will use the data to set capital requirements for each bank as part of a regular review called SREP.

The last similar exercise two years ago indicated a capital depletion of 3.3 percentage point to 8.8 percent, but the current exercise is based on an even more severe.

“The larger capital depletion reflects not only a more severe macroeconomic scenario, but also the introduction of International Financial Reporting Standard 9,” the ECB added.

The ECB is increasingly applying tailor-made capital requirements based on each bank’s risk profile and plans to give lenders their new capital guidance sometime in January.

The stress test was part of a wider European Union exercise conducted in cooperation with the European Banking Authority (EBA), aimed at covering about 70 percent of the bloc’s banking assets. The ECB also tested about 60 more banks but did not release figures for this part of the exercise.

For more on the stress test, click on: (Reporting by Balazs Koranyi Editing by Alexander Smith)

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