The European Central Bank will consider the impact of future lawsuits and fines in its review of whether the eurozone’s 131 most important lenders have enough capital to withstand another massive recession.
The treatment of legal costs was outlined in a 72-page document detailing the quality assurance programme the ECB will use to assess data it has gathered about banks’ portfolios, as well as the way this information will be fed into predictions of banks’ future losses.
“We are dedicating considerable time and effort to making this process rigorous,” said Vitor Constancio, vice president of the ECB, adding that this distinguished its exercises from previous reviews by the European Banking Authority (EBA), which were widely discredited.
