(Finance) – The European Central Bank (ECB) published the results of theasset quality review (asset quality reviews, AQR) conducted on FinecoBank and AS LHV Group. Both banks were classified as significant and are therefore now subject to the direct supervision of the ECB.
The AQRs carried out by the supervisory authority have the aim of verifying the valuations of banks’ assets from a prudential perspective, increasing transparency on their exposures and assessing the adequacy of capital levels. The AQR results of each bank flow into the prudential review and evaluation process (Supervisory Review and Evaluation Process, SREP), with which the risk profile of individual entities is assessed.
The AQR conducted on FinecoBank and LHV Group focused on credit risks. In the case of FinecoBank, the residential property portfolios and other retail portfolios were analysed, while for LHV Group the portfolios relating to small and medium-sized enterprises and the real estate portfolios were examined. For both banks, the selected portfolios represent more than 80% of risk-weighted assets.
From the AQR results it emerged that neither bank has capital shortfallsas the tier 1 primary capital ratios (Common Equity Tier 1, CET1) are not lower than the 8% threshold also in force for previous years.
In particular, FinecoBank’s starting CET1 ratio is 20.82%, the impact of the AQR is -21 basis points and the CET1 ratio adjusted based on AQR equal to 20.61%.