Asset review will make stress tests harder, says ECB vice president

ECB vice president Vitor Constancio said the fact that eurozone bank balance sheets will be probed before undergoing a simulated economic downturn later this year makes the test harder to pass.

“We have our own big add-on, in that we will integrate the results of the asset-quality review into the stress test, which will aggravate the results of the stress test,” Constancio said in Frankfurt yesterday after giving an update on the ECB’s health check of the financial system.

The ECB said the region’s largest banks will have to show their capital won’t fall below 5.5% of their risk- weighted assets in a crisis, matching stress-test parameters set by the European Banking Authority.