Concerns grow over stress tests’ impact on bank capital market
The European Central Bank on Wednesday outlined the methodology of its upcoming bank asset quality review (AQR) and stress tests, which will indicate the health of the eurozone’s lenders before the ECB takes over as sole supervisor in November 2014. The results of the tests will inevitably lead to some banks needing to bolster their capital — but ECB president Mario Draghi is concerned that new state aid rules around the use of public rescue funds could undermine investors’ appetite for bank capital.
The eurozone’s top 130 lenders will need to meet an 8% common equity tier one capital ratio to pass the tests, which will be completed by next October.
The 8% ratio can be broken down into a fully phased-in Basel III CET1 ratio of 4.5%, a 2.5% capital
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