Banks trim risk but fail to raise provisions ahead of EU review

An illuminated euro sign is seen in front of the headquarters of the European Central Bank in FrankfurtBy Laura Noonan LONDON (Reuters) – Most of Europe's big banks shed risky assets in the quarter to September, but they have yet to take extra provisions against doubtful loans to show they have put the financial crisis behind them in time for a critical review by regulators. After reckless lending brought several banks and some governments to their knees during the global crisis, which is still playing itself out in a number of euro zone countries, next year's Asset Quality Review (AQR) by the European Central Bank will judge whether the banks have done enough to recognize and provide for losses on their loan books as of December 31. The results feed into EU-wide stress tests that assess whether banks need to raise more capital to insulate themselves against future economic and financial shocks. Assets such as unsecured personal loans, distressed commercial loans and certain derivatives carry a higher risk weighting, while government bonds are unweighted.

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