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Commerzbank set to pass ECB bank stress test: sources

Monday, October 13, 2014 - 19:23
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Preliminary discussions between Germany's Commerzbank and the European Central Bank have given the German lender no reason to believe its capital will fall below the minimum levels required in the euro zone's landmark bank tests, two sources familiar with the talks told Reuters. - PHOTO: AFP

[Frankfurt] Preliminary discussions between Germany's Commerzbank and the European Central Bank have given the German lender no reason to believe its capital will fall below the minimum levels required in the euro zone's landmark bank tests, two sources familiar with the talks told Reuters.

The ECB is carrying out a series of "supervisory dialogues"with the 130 banks in the tests to give them early warning of how they have fared so that they can plan any capital raising actions needed. The ECB has stressed that the information is"partial and preliminary".

Sources familiar with the Commerzbank talks, which took place last week, said the ECB had not given any signal that would indicate that the bank would fall short of the minimum requirements. "After the supervisory dialogue (with the ECB) there are no indications that the bank may have failed," said one of the sources on conditions of anonymity because the deliberations are private. A second source confirmed the dialogue result.

Some analysts have pointed to Commerzbank as one of the few banks that may fall short of the ECB's stringent capital requirements.

Commerzbank Chief Executive Martin Blessing has stressed repeatedly in the past that he believed the bank to be well-positioned to pass the test, which the ECB is carrying out before becoming Europe's banking supervisor from November 4.

An ECB spokeswoman said: "We cannot comment on individual institutions. Any inferences drawn as to the final outcome of the exercise would be highly speculative as the results are still in preparation." The ECB is currently reviewing how 130 of the euro zone's largest banks value their assets and is testing whether their capital is strong enough to allow them to weather future crises. The results will be published on October 26.

Banks that only marginally exceed the 5.5 per cent Core Tier 1 ratio required by the ECB could be forced to take steps to boost their capital all the same, through measures like curbing dividends.

These measures would be less disruptive for shareholders than the remedies for banks that dip below the thresholds and are forced to take more radical steps like raising additional equity or converting contingent debt instruments into shares.

Commerzbank declined to comment. REUTERS