The European Central Bank made one of its most forceful interventions to date in its stress tests for banks, after lenders took what it viewed as an unrealistic approach to assessing risks to their balance sheet.
Banks, which are being asked in the tests to calculate the impact of specific economic scenarios, initially estimated their total capital ratio would decline by about 3.5 percentage points in a worst case, according to people familiar with the matter. The ECB subsequently adjusted the figure, leading to an impact of about 5 percentage points in the final results, the people said.
Read More : ECB’s Stress Test Overhaul Comes in Response to Banks’ Rosy Interpretations