Many supervisors in this diverse group of 11 countries told Reuters they will align their reviews closely with the ECB's assessment of major banks within the currency bloc, a tactic that analysts say should dispel any suspicions that their national tests lack rigor.
These exercises risk claiming some non-eurozone banks as collateral damage if there is any perception among investors that results verified by the ECB carry more weight that those produced by supervisors in countries outside the eurozone.
But this prospect now looks remote in many of the 11 countries which are mostly in central and eastern Europe but also include Sweden and Denmark, as well as Britain. A number of authorities said they are taking steps to mimic major parts of the ECB's exercise, and several said they might hire external consultants to validate their data. "We would be eager to take part in the EU-wide asset quality review, as the coordinated effort would ensure comparability of results", a spokesman for Poland's Financial Supervisory Authority said. "Otherwise, there will be a needless split of the EU banking sector into two parts."
A number of banks may need to raise more capital to fill gaps revealed by the tests, and investors would probably shy away from a lender if they feared the exercise had failed to reveal all problems on their balance sheets. However, investors and banks analysts told Reuters any differences in the assessments are unlikely to be significant enough to dent investment in banks outside the eurozone - where about a quarter of the EU's €43.5 trillion of banking assets are held in standalone banks and domestic groups that largely come under the local regulators.
Supervisors in the non-eurozone countries must perform national AQRs, which will include assessments of whether banks have properly valued assets on their balance sheets - unlike during the crisis when highly rated assets such as sub prime mortgage bonds turned out to be worthless.
Supervisors in Lithuania, Poland, Sweden, Denmark, Croatia and Latvia - which is due to adopt the euro on January 1 - told Reuters their AQRs would use the same definitions as the ECB for non-performing loans and forbearance, when banks give borrowers more time to catch up on overdue repayments. KBW bank analyst Ronny Rehn described this as "one of the first milestones" for how non-eurozone regulators would conform with the ECB review.
Britain has yet to say publicly whether it will use the EBA definitions for its tests, a spokeswoman for the Bank of England told Reuters. But Britain, which had to bail out some of its biggest banks during the crisis, has already conducted stress tests on major lenders and is generally at least as rigorous as eurozone authorities in assessing its banks. A source familiar with the international discussions on harmonising definitions of non-performing loans and forbearance said he expected Britain would adopt them. "I don't see any reason why they wouldn't", he said. "They weren't exactly exercised about it over the course of the negotiations."
KBW's Rehn said national decisions on whether to adopt EBA definitions would be a first point of judgement. "If a country says 'I'm not happy using this definition' there might be some suspicion that their tests might not be as rigorous", he said. However, he noted the Czech Republic conducted stress tests every quarter with "fairly harsh assumptions". Most Czech banks were owned by parents based in the eurozone which will have to comply with the EBA definitions at group level, he said. "Czech regulators will likely have to play ball. I think this applies to all central and eastern European countries really - Romania, Bulgaria and even Hungary in my view."
In Hungary, the central bank said its banks would not be able to "meet the entire range" of the data needed for the stress tests, and would not use the EBA definitions until they become mandatory at the end of 2014.
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Italian banks told to raise 1.2 billion euros for ECB review
Italian banks will need to raise €1.2 billion to meet a minimum threshold for higher-quality capital set by the European Central Bank in a planned check-up of eurozone lenders, the Bank of Italy said on Tuesday. In its bi-annual Financial Stability Report, Italy's banking regulator said it had already asked weaker lenders in a group of 15 due to be scrutinised by the ECB to boost their capital base and said it was keeping a close eye on them.
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