“The AQR will standardize the concept of delinquency (which varies greatly between countries, from the most conservative as Italy up to the more lax as Portugal) and coverage rates,” the same experts stated. “We also believe that it will focus on banks’ troubled assets portfolios, including refinanced loans (could be fully included in NPLs). The impact for Spain would be, in principle, less than for other countries.”
In general, the AQR criteria as well as the stress tests hypothesis can be especially hard, “especially taking into account that they are the steps leading to the takeover of the ECB’s role of single regulator,” Santander analysts explain.
According to their estimates, “for a minimum 12% B2.5 CT1 ratio, and stressing both loans as the financial assets, the capital requirements of major European banks would be of € 55million, concentrated mostly in Italian banks. In any case the smaller entities of peripheral countries (outside of our coverage universe) are likely to get the worst test results.