ECB fears banks may be ‘overestimating’ their internal capital levels

By Tyler Davies
12 Aug 2020

The European Central Bank has asked financial institutions to justify why they are using additional tier one and tier two bonds as sources of internal capital, highlighting its concern that the instruments lack real economic value.

The ECB put forward its views this week in a new report looking at how banks approach the internal capital adequacy assessment process (ICAAP). 

ICAAP is supposed to encourage banks to reflect on whether they have enough capital to cover for the risks they face.


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