The European Central Bank (ECB) has published a manual setting out the methodology for phase 2 of its asset quality review (AQR). The purpose behind the AQR is to encourage transparency of the balance sheets of significant banks, trigger balance sheet repair where necessary, and rebuild investor confidence ahead of the ECB assuming its role under the single supervisory mechanism in November 2014.

The methodology in the manual includes ten key work blocks, that examine:

  • processes,
  • policies;
  • accounting procedures;
  • credit file reviewing procedures;
  • collateral value appraisal; and
  • level 3 fair value assets.

Phase 2 is expected to run until August 2014 and comprises a review of the assets, collateral and provisioning in selected portfolios. It will be followed by the third and final phase (that is, quality assurance and reporting of results), which is due for completion in October 2014, when the results of the AQR will be released together with the results of the stress test conducted in co-operation with the European Banking Authority.

View Asset quality review – phase 2 manual, 11 March 2014

View ECB publishes manual for asset quality review, 11 March 2014

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