The ECB (European Central Bank) has raised the minimum capital requirements for Liberbank and Sabadell in the 2019 fiscal year as part of the supervisory review and evaluation process (SREP), the documents that have been sent by both financial entities on Monday to the National Securities Market Commission (CNMV). Liberbank already meets these requirements for the year 2019, according to the relevant fact that it has sent to the regulator.
In particular, the European banking supervisor requires that, as of March 1, Liberbank has a minimum CET ratio (capital of maximum quality) 1 phased-in of 9.5%, compared to the 8.875% required for 2018, and with a total capital ratio phased-in minimum of 13%, compared to 11.75% a year earlier. These ratios include the regulatory minimum of Pillar I (4.5% for CET1 and 8% for total capital), the Pillar 2 requirement of 2.5% and the capital conservation cushion of 2.5%. At year-end 2018, the entity had some ratios phased-in of CET 1 of 13.9% and of total capital of 15.5%, above the requirements established by the ECB.
As reported by Liberbank on Monday in the document sent to the CNMV, its dividend policy "will be consistent with its strategy of strengthening capital and in accordance with the regulatory requirements in force."
In the case of Banco Sabadell, the ECB has also raised the minimum prudential requirements that the entity requires for 2019 the impact that the migration of the data of its clients of technological platform has had after the entity's purchase of Lloyds Bank from its British subsidiary TSB, although the entity has informed the regulator that its current ratios are above that limit.
In particular, the ECB requires a minimum ratio of CET 1 phase in of 9.64%, compared to 8.3125% a year earlier, and a total capital ratio phase in minimum of 13.14%, compared to 11.8125% in 2018. In terms of fully loaded, the ECB requires maintaining minimum CET 1 ratios of 9.64%, compared to the previous 9%, and total capital 13.14%, compared to 12.5% a year ago.
These ratios include the minimum required by Pillar 1 (4.5%), the Pillar 2 requirement (2.25%), the capital conservation buffer (2.5%), the requirement derived from its consideration as another entity of systemic importance (0.25%) and the requirement for the countercyclical capital buffer (0.14%). As reported by Sabadell, at the close of the 2018 fiscal year its capital ratio CET 1 phase in it stood at 11.98% and its total capital ratio at 15.49%. Also, the CET 1 ratio fully loaded it was 11.1% and the total capital ratio was 14.73%.
"Banco Sabadell exceeds the required limits, so it has no limitations on distributions in the form of dividends, variable remuneration and coupon payments to holders of additional Tier 1 capital securities," the entity reported in the statement. relevant to the regulator of the Spanish market. The bank chaired by Josep Oliú has acknowledged that the impacts he has had to face after the computer failure that occurred in its British subsidiary TSB, have had an impact on the increase in prudential requirements.
In any case, Sabadell has pointed out that these requirements do not reflect the improvement of the entity's risk profile after the institutional sales of portfolios of problematic assets, given that the technical criteria adopted in the 2019 SREP evaluation take them into consideration in the moment of its closure. The bank agreed to the sale in 2018 of 12.2 billion euros of problematic assets. This action "completely transformed the bank's risk profile and reduced the ratio of net problematic assets to total assets from 2.9% to 1.8%," according to the entity in the relevant event sent to the CNMV.
Payment of dividends
Banco Sabadell estimates that by 2019 the dividend payment of 50% of the recurring profits. Additionally, in 2018 the bank announced the institutional sales operations of portfolios of problematic assets and the sale of Solvia Real Estate Services, whose closure is only pending of the corresponding administrative authorizations.
According to the bank, the capital generated with these operations will absorb the impacts required by the new IFRS16, as well as those expected in the TRIM (Targeted Review Internal Models) exercise, which in the case of Banco Sabadell covered the revision of the models that apply both to mortgage portfolios to individuals and to company exposures.