FRANKFURT (Reuters) -The European Central Bank imposed additional capital charges on 13 euro zone banks this year, judging that they might be taking on more risk than they can absorb.
This “add-on” to the banks’ leverage ratio requirement, which measures a bank’s core capital as a percentage of its total assets, was applied to more than twice as many banks as last year and was worth between 10 and 40 basis points.
It was the single biggest change in the ECB’s annual evaluation of the 113 banks on its watch, which it generally found in good shape.
“The asset quality of European banks is robust, they have overall solid capital positions, good levels of profitability, and are a reliable source of funding and financial services for European households and firms,” the ECB’s top supervisor Claudia Buch said.
Still, the ECB slapped further capital add-ons on 18 banks that it found not to have made sufficient provisions for unpaid loans, down from 20 last year.
Nine banks faced additional requirements for their exposure to highly indebted borrowers, or “leverage finance” in market speak. The ECB did not mention any lender as is its policy.
Next year, the ECB will focus its supervisory work geopolitical risks, including financial sanctions and cyberattacks, and a more subdued economy.
“Adverse geopolitical events are often not priced in by financial markets, which can lead to an abrupt repricing of risks if such events materialise,” Buch said. “In terms of the real economy, higher costs for firms and disruptions to global trade could increase credit risk.”
(Reporting by Francesco Canepa, Editing by Louise Heavens)
