FRANKFURT, March 2 (Reuters) - The European Central Bank (ECB) is set to become the euro zone's single bank supervisor from November.
Before then, it wants to complete several checks on the banks it will watch over directly, appoint a supervisory board for the new institution and hire at least 1,000 staff.
The main part is the so-called comprehensive assessment, which includes a backward-looking asset quality review and a forward-looking stress test of banks' balance sheets. All the results will be condensed and published in October.
Here is a preliminary overview of what will happen in the next few months, based on documents from supervisors seen by Reuters:
(For a story on the new bank watchdog please click on: )
Asset Quality Review (AQR): Selection of most risky portfolios for inclusion in the AQR on a bank-by-bank basis, selected portfolios must account for at least 50 percent of a bank's risk-weighted assets
Stress test: European Banking Authority (EBA) to decide on draft for stress test methodology and data sheets, consultation with banks follows
AQR: Actual review of the assets, collateral and provisioning in the selected portfolios and level-3 fair-value assets, or hard-to-value assets, will start in March.
Publication of the AQR methodology
Stress test: Finalising of macro-economic scenarios
Bank feedback on methodology, data sheets
BY MARCH 7
AQR: Selection of trading book models and portfolios.
The ECB has identified 29 banks with material trading book exposures that will be subject to a more specifically tailored AQR of the trading book - an in-depth review, not only focusing on non-derivative level-3 exposures, but also including a review of both level-3 derivative pricing models and core trading book processes.
BY MARCH 14
AQR: Completion of the so-called loan tapes, for which banks have to submit data on their credit exposure for at least all selected portfolios, which will include segment classifications, status and identifiers of the loan-entity.
BY MARCH 28
AQR: Review of banks' internal processes, policies (Who approves loans? How are decision being taken? How are credit standards developed? Which models are being used? etc)
BY APRIL 11
AQR: Data integrity validation
BY APRIL 18
AQR: Sampling of credit files for credit file review
Stress test: Scenarios to be sent to the banks by the EBA
APRIL 25 - JUNE 20
AQR: Credit file reviews to verify that credit exposures have been correctly classified and that, if a specific provision is required, it has been set a an appropriate level; collateral and real estate valuations
Stress test execution
Stress test: Preliminary results
BY JULY 27
AQR: Projection of findings of credit file reviews
Stress test: Quality assurance of preliminary results
BY AUG 1
AQR: Collective provision analysis; final report, which will not be published
ECB to draw up the final list of significant banks to come under its direct watch at least two months before Nov 4.
Stress test: Final results
ECB aims to conclude comprehensive assessment, which includes a risk assessment, the asset quality review and the stress tests, and to publish results.
NOV. 4, 2014
ECB to begin supervising the euro zone's top banks, about 130. The remaining 5,900 or so banks will continue to be supervised by national authorities, but the ECB will have the power to intervene if necessary.
(Reporting by Eva Taylor and Philipp Halstrick. Editing by Jane Merriman)