By Francesco Canepa and Francesco Guarascio
FRANKFURT/BRUSSELS (Reuters) - The European Central Bank has, on average, slightly raised the minimum capital level that it demands large euro zone banks hold, the ECB's supervision chief said on Monday.
The ECB's Single Supervisory Mechanism (SSM) is deciding how much additional capital, known as Pillar 2, each of the 122 banks under its supervision must hold in 2016. It is also setting a further buffer for globally significant euro zone banks.
"We can already say that Pillar 2 capital requirements envisaged for the SSM significant institutions in 2016 are slightly higher than in 2015 – by circa 30 basis points on average," Danièle Nouy, chair of the supervisory board of the ECB, told European parliamentarians.
"In addition to Pillar 2, the phasing-in of buffers requires around 20 additional basis points of capital."
The ECB sent draft letters with its requirements to individual banks over the past few weeks and is now hearing their arguments before it makes final decisions in November. Those decisions will not be disclosed.
A source told Reuters earlier this year that around 80 percent of the institutions supervised by the ECB will be required to hold a Core Equity Tier 1 ratio of 9 to 12 percent, with half of the total having to hold a CET1 of 10 percent.
SSM supervisory board member Luc Coene said last month almost all banks under the SSM's supervision have more capital than required.
Leading banks on both sides of the Atlantic have come under market and supervisory pressure to hold capital well above minimum legal requirements. A core ratio of 11 to 12 percent is considered the new norm, compared with a fraction of that before the financial crisis.
One source of disagreement between the ECB and some banks relate to counting capital from a bank's insurance unit towards the firm's capital, albeit at a discount.
Nouy had long voiced her preference for scrapping this rule but remained in a minority.
"Regarding the so called Danish compromise... we were very split, almost 50/50, but one camp was a little bit more than 50, the camp that wanted to keep it, so for the time being it's still there," she said.
She added the ECB would carry out a separate stress test for banks under its supervision that will not take part in a pan-European exercise designed by the European Banking Authority.
"The banks that will not be picked for the EBA stress test will have some kind of stress test under the SSM in a non-public fashion ... to assess the need for capital requirements, she said.