ECB To Launch EU-Wide Audit Of Bank's Balance Sheets

Tyler Durden's picture

France and Italy are fighting against ambitious plans by the ECB to basically 'externally audit' 140 banks across the EU representing 80% of Europe's banking assets. The implementation of the project (by the head of financial stability at the central bank) appears to have two main drivers. First, to understand which banks' balance sheets are inhibiting lending (and why); and second, to ensure there is clarification on taxpayer-funded bailouts versus shareholders and depositors taking losses first. As Zeit reports, it seems the ECB appears to be questioning the reliability of the banks own figures.

Via Zeit (via Google Translate),

The European Central Bank (ECB) is working on a strong kick to overcome the crisis. It goes to the timely information in a rehabilitation center to European banks, whose balance sheet problems inhibit lending.

 

With the implementation of the project was Ignazio Angeloni commissioned, head of financial stability at the central bank. The timing is already set. From the autumn of the monetary authorities will illuminate along with the national supervisory authorities, the balance sheets of major financial institutions in the euro zone. There is a total of around 140 banks, which together cover about 80 percent of the market.

 

The ECB teams are already formed to examine the books as required directly into the banks. Thus, at the end come out reliable figures, is the intention of the central bank also independent consultants - to be on board - WirtschaftsprĂĽer or investment companies.

 

...

 

Results are expected by early next year. If they are present, to use a stress test to examine how well the banks cope with a renewed economic slump. Financial institutions that can not even fill possible gaps capital should be recapitalized by the Member States. If they are not able to lift the renovation alone, they can access loans from the ESM bailout fund to fall back.

 

The risk should not alone bear the taxpayers: Even shareholders, creditors and customers of the affected banks will be first used to cover the losses.

 

Whether the ambitious timetable can be adhered to, is not clear. Especially France and Italy, reportedly to fight against it, to have their banks by external auditors. The ECB could see forced to look not as accurate when examining the balance sheets, because there is still no European resolution authority for banks are.