ECB to limit bank stress tests input

The ECB plans to limit the amount of data it carries over from an ongoing asset review into a subsequent stress test as it tries to manage the burden from its unprecedented health check of eurozone lenders.

Instead of entering all loan values obtained in the asset quality review that ends this month into its stress test, officials will apply a “materiality threshold” to ensure only significant results are incorporated, according to a draft ECB document seen by Bloomberg News.

Regulators have yet to sign off on the methodology, including a definition for that term. ECB officials have vaunted the credibility of the stress test that it is conducting with the European Banking Authority compared with previous exercises, citing the use of scrubbed data from 160,000 credit files to enhance its reliability.