The European Central Bank (ECB) is considering factors other than sheer size as it finalizes a list of banks that will require its direct supervision, says Fitch Ratings.
In a new report, the rating agency says that the ECB’s latest update to the list of banks it considers significant enough to supervise directly largely reflects factors other than just size. The latest version of the list is down to 120 institutions from 128, Fitch notes, as 12 firms have been dropped, and four others have been added.
“The banks taken off the list mostly have niche characteristics and business models that are more in line with non-bank financial institutions, have reduced in size, or are less domestically important,” Fitch notes. “The new joiners are part of international groups, with three having ultimate parents outside the eurozone, so cross-border activities may be an influence in determining their significance.”
The final list will be published in September, and it will be reviewed on a regular basis, ahead of the ECB assuming its prudential supervisory role in November, Fitch notes.
Most of the 120 banks considered significant by the ECB are also participating in the European Banking Authority’s (EBA) latest stress test, Fitch adds. “The EBA’s list is final, so banks that fall out of the ECB’s direct supervision but are on the EBA list will still be participating in this year’s stress test,” says Fitch. “However, we would expect the leavers to be excluded in subsequent EBA stress exercises.”