ECB justifies including Deutsche Bank China sale in stress tests

The European Central Bank said it had agreed to include Deutsche Bank's sale of its stake in lender Hua Xia in stress test results earlier this year after Chinese authorities gave assurances the deal would be approved.

The official cut-off point for transactions to be included in the health checks of Europe's banks was the end of 2015. Yet, while Deutsche Bank announced the deal at the end of December, China's financial authorities had still not approved it when the stress tests were completed in July. They finally did so last week.

The inclusion of the stake in the stress test calculations boosted Deutsche Bank’s common equity tier-one capital ratio, a closely watched measure of financial strength, in the adverse scenario modelled as part of the exercise, from 7.4 per cent to 7.8 per cent.

Supervisory board

Speaking in Brussels at the committee on economic and monetary affairs on Wednesday, Danièle Nouy, chair of the ECB's supervisory board, when asked about Deutsche Bank's Hua Xia stake, said: "I believe that we did what we had to do. We have treated all of the banks in the same situation in exactly the same fashion."

The inclusion of the Hua Xia sale in Deutsche Bank’s stress test results was disclosed at the time as a footnote in the German bank’s results.Deutsche Bank declined to comment. – Copyright The Financial Times Limited 2016