Capital amount demanded of euro zone banks won’t change with ‘guidance’

The total amount of capital that euro zone banks are expected to hold as a safety buffer would not change even if part of it was expressed as non-binding “guidance” by the watchdog, one of the European Central Bank’s top supervisors said on Wednesday.

“This adjustment to the…concept would not change the total capital level; it would just be divided differently between requirements and guidance,” Sabine Lautenschlaeger, who represents the ECB’s supervisory arm on the bank’s executive board, said.

The ECB supervises the bloc’s 129 largest banks and decides how much capital each of them needs to set aside as part of an annual review known as SREP.

A European Commission document to member states seen by Reuters earlier this year said a bank could only be stopped from paying dividends, bonuses and discretionary coupons when it was in breach of its regulatory capital requirements.

Supervisors could give further “guidance” to a bank about its capital, although failure to follow this advice would not result in a ban on distributing profits to investors or staff, the document said.

Source: Reuters