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ECB review shows 1 eurozone bank short on capital buffer targets

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ECB review shows 1 eurozone bank short on capital buffer targets

One eurozone bank out of 119 surveyed by the European Central Bank's Single Supervisory Mechanism had capital levels below the level at which distribution restrictions can be introduced.

In a publication outlining its supervisory review and evaluation process to be applied in 2018, the SSM also indicated that a second bank's capital buffer was barely above the so-called maximum distributable amount threshold as of the end of June. The specific banks were not identified.

A year ago, five banks were below the MDA trigger, Reuters noted Dec. 15, adding that of those, Italian lenders Banca Popolare di Vicenza SpA and Veneto Banca SpA went on to collapse.

Through the SREP program, the SSM assigns each of the banks for which it is responsible bespoke capital targets. On average, banks will be required to hold a 10.6% common equity Tier 1 ratio when including so-called systemic buffers, up slightly from 10.4% in 2017.

A total of four banks had "quantitative liquidity SREP requirements," meaning that they have to hold additional capital against liquidity risk. Two of those, plus 35 others, had qualitative liquidity requirements.

The SSM said overall nonperforming loan ratios declined in the past year, but that the number of "high-NPL banks" in the eurozone remains "substantial."