Wednesday, 2 March 2011
EU Regulators Plan Bank Stress Tests
The results of the tests will be published in June, the European Banking Authority, the new pan-EU banking regulator, said in a statement after a board meeting.
The tests will examine how well Europe's banks could withstand sharply higher loan losses, falling securities prices and other potential results of a sharp macroeconomic slowdown. The scenario for that slowdown will be designed by the European Central Bank and then be applied to the portfolios of the region's banks by national regulators.
A key question is whether the tests will examine what would happen to a bank's capital if a euro-zone sovereign government defaults. Investors have become increasingly worried that Greece and Ireland, despite receiving emergency financing support from euro-zone governments, will ultimately be forced to default on their debt.
The EBA didn't address this issue and said details of the bank stress-test methodology are still being discussed. The banks will receive the stress-test scenarios by the end of this week, and the scenarios will be published March 18, the EBA said.
The EBA is also discussing with EU governments "back-stop measures" that the governments could use to help banks that fail the tests, presumably funds to inject fresh capital into the banks.
Posted by IMS Instant Pay at 13:15