Europe to better bank stress tests
By Gabriele Steinhauser and Pan Pylas |
January 19, 2011, Wednesday
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Print Edition
Print Edition
EUROPEAN officials are taking advice from US counterparts on how to improve bank stress tests as they try to shore up their defenses against a debt crisis that has crippled the euro currency zone over the past year, according to Belgium's finance minister.
Didier Reynders said yesterday that Europe has to organize "better" and more transparent stress tests than those conducted last summer. The results published in July came under a huge amount of criticism for giving the all-clear to a number of banks that have since been shown to need help, notably in Ireland. Many analysts dismissed them as nothing more than a whitewash.
"We need to organize the same kind of stress tests on both sides of the Atlantic Sea because if we don't have the same kind of stress tests as the US and in Europe, we will have many criticisms of them," Reynders said ahead of a meeting of the EU's 27 finance ministers.
The comments come a day after ministers from the 17 euro nations discussed boosting the size and powers of the region's bailout fund as a way to help tame the market turmoil that has pushed Greece and Ireland to require rescues. While they indicated that final decisions on the matter would be taken over the coming months, the bloc is clearly trying to come up with a more comprehensive solution to its crisis.
Reynders said discussions about the stress tests are currently taking place between Michel Barnier, the EU's internal markets commissioner, and US colleagues to organize similar stress tests.
While the European stress tests met a lukewarm response - at best - in the markets, the US tests of 2009 were widely credited with helping to ease the financial crisis in the world's largest economy and limiting the length and depth of the recession.
Ten of the 19 US banks that were tested failed and were forced to raise nearly US$75 billion to shore up their finances. In sharp contrast, only seven of 91 European banks tested failed and were required to raise a paltry 3.5 billion euros (US$4.69 billion).
Didier Reynders said yesterday that Europe has to organize "better" and more transparent stress tests than those conducted last summer. The results published in July came under a huge amount of criticism for giving the all-clear to a number of banks that have since been shown to need help, notably in Ireland. Many analysts dismissed them as nothing more than a whitewash.
"We need to organize the same kind of stress tests on both sides of the Atlantic Sea because if we don't have the same kind of stress tests as the US and in Europe, we will have many criticisms of them," Reynders said ahead of a meeting of the EU's 27 finance ministers.
The comments come a day after ministers from the 17 euro nations discussed boosting the size and powers of the region's bailout fund as a way to help tame the market turmoil that has pushed Greece and Ireland to require rescues. While they indicated that final decisions on the matter would be taken over the coming months, the bloc is clearly trying to come up with a more comprehensive solution to its crisis.
Reynders said discussions about the stress tests are currently taking place between Michel Barnier, the EU's internal markets commissioner, and US colleagues to organize similar stress tests.
While the European stress tests met a lukewarm response - at best - in the markets, the US tests of 2009 were widely credited with helping to ease the financial crisis in the world's largest economy and limiting the length and depth of the recession.
Ten of the 19 US banks that were tested failed and were forced to raise nearly US$75 billion to shore up their finances. In sharp contrast, only seven of 91 European banks tested failed and were required to raise a paltry 3.5 billion euros (US$4.69 billion).
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