ECB meets bankers before earnings signal unfinished business

By Jeff Black, Shane Strowmatt & Sonia Sirletti

Europe’s lenders are running out of time to get their books in order before the European Central Bank passes judgment on them.

As executives from 128 banks meet in Frankfurt this week with some of the officials examining them, managers of the ECB’s Comprehensive Assessment are working out a mid-October date for final disclosure and guiding lenders through a conclusive stress test. Meanwhile institutions including Erste Group Bank AG (EBS) are stepping up efforts to take the sting out of the outcome by acknowledging losses and raising fresh capital.

Aiming to create a clean sheet for the region’s wounded lenders and foster credit to the economy, the ECB is urging them not to wait until the results of its health check are out. As its Asset Quality Review comes to an end this month, a round of quarterly earnings should boost the 104 billion euros ($141 billion) worth of measures cited by the ECB as already taken by banks to strengthen balance sheets.

“The comprehensive assessment is as much about the process as the results,” said Bridget Gandy, managing director for financial institutions at Fitch Ratings Ltd. in London. “It shouldn’t be that you have to wave a stick at the banks and tell them to get the capital in after the results, they should be -- and largely are -- doing whatever they can now.”

Ravaged economies

Last week, Erste, the Austrian bank earning most of its income in eastern Europe, said it will post a loss this year of up to 1.6 billion euros as bad-loan provisions rise 40 percent more than forecast. Erste Chief Executive Officer Andreas Treichl said the measures will help the bank pass the ECB’s assessment.

Exposures to economies ravaged by the...