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ECB's stress test threshold not expected above 8 percent: official

A passerby uses his smartphone to take a picture of the euro sign landmark in front of the headquarters of the European Central Bank (ECB) i
A passerby uses his smartphone to take a picture of the euro sign landmark in front of the headquarters of the European Central Bank (ECB) i

MILAN (Reuters) - The minimum capital requirement the European Central Bank will set in the stress tests that are part of its upcoming extensive check-up of euro zone banks should not go above 8 percent, a top Bank of Italy official said on Monday.

That level is the common equity Tier 1 capital lenders are required to meet under an asset quality review (AQR) which the ECB is set to conduct before the stress tests.

"I imagine it will not be higher," Bank of Italy Deputy Director General Fabio Panetta said, adding discussions on how to shape the stress tests were ongoing in Europe.

Panetta said it would be hard to imagine that banks could be required to meet a more challenging capital threshold under the unfavorable scenario simulated in a stress test than under normal circumstances.

Common equity is the part of bank's capital better able to absorb possible losses.

Panetta spoke to reporters after presenting the central bank's latest Financial Stability Report at Milan's Bocconi University.

The in-depth scrutiny of around 130 European lenders is aimed at unearthing potential risks in their balance sheets and restoring confidence in the industry before the ECB takes over supervision from national regulators late next year.

(Reporting by Gianluca Semeraro)

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