The European Central Bank has been taking a closer look at the trading books of three of the euro-zone’s biggest lenders, according to people briefed on the matter.
The Frankfurt-based supervisor asked BNP Paribas SA, Deutsche Bank AG and Societe Generale SA several months ago to provide information on how they value bonds, stocks and derivatives on their trading books, the people said, asking not to be identified discussing confidential information. The review is now close to a conclusion, they said.
News of the probe was reported earlier by Sueddeutsche Zeitung. BNP Paribas, Deutsche Bank and SocGen declined to comment when contacted by Bloomberg News.
The ECB has made no secret of its intention to take a close look at the trading operations of the euro area’s largest banks, particularly at how they use the leeway they’re given to price hard-to-value assets and liabilities themselves. Such Level 3 instruments represent less than 1 percent of euro-zone bank assets, ECB data show, but they’re considered important to keep an eye on because of the potential risks they pose to financial stability.
Daniele Nouy, chair of the ECB’s supervisory board, said last month the institution had subjected major trading banks to “a combination of enhanced monitoring, ‘deep dives’ and on-site inspections” on Level 3 assets, though she wasn’t specific about which firms were targeted. ECB executive board member Sabine Lautenschlaeger has also talked about collecting information on lenders.