EU set to conduct new stress tests on banks in February
By Gabriele Steinhauser and Pan Pylas |
December 8, 2010, Wednesday
|
Print Edition
Print Edition
THE European Union yesterday conceded its previous bank stress tests were not stringent enough as it confirmed that it will start a new round in February, while the continent's strongest economies bet they can sort out the region's debt crisis without the need to top up bailout funds.
Germany, backed by the Netherlands and Austria, is refusing to increase the 750-billion-euro (US$1 trillion) bailout fund set up to help euro members that run out of money or back calls for a new pan-European bond.
Given the refusal of a number of countries to back fresh "shock and awe" measures putting up new money to deal with the crisis, the EU is now counting on highly indebted states such as Spain and Portugal to press ahead with deep austerity measures. Meanwhile, the EU is working to contain risks from spreading from the banking sector.
As a result, it decided to conduct a new round of stress tests on Europe's banks from February.
Olli Rehn, the top monetary official in the EU, said these will be "more rigorous and more comprehensive" than those conducted on 91 banks in July and will crucially assess a bank's liquidity position, which the earlier version did not.
"The scope and methodology of the exercise are currently under discussion but of course we will draw lessons from the exercise earlier this year," Rehn said.
Rehn would not say whether the results will be published in the same manner as those in July, but added that his preference was for full transparency - there have been some calls to keep the results under wraps and allow banks to sort out their finances away from the glare of publicity.
July's stress tests have come under criticism after the bailout of Ireland last month was predicated largely on revelations of worse financial problems afflicting its banks. All the Irish banks assessed in July were given a clean bill of health as only seven of the 91 banks tested failed.
Investors continue to fret about the financial health of many of Europe's banks and how they impact on governments' potential liabilities.
The most acute concerns center on Portugal and Spain, widely viewed as the weakest links in the 16-country currency union. Many analysts have warned that the region's existing emergency rescue fund would be too small to save Spain.
Germany, backed by the Netherlands and Austria, is refusing to increase the 750-billion-euro (US$1 trillion) bailout fund set up to help euro members that run out of money or back calls for a new pan-European bond.
Given the refusal of a number of countries to back fresh "shock and awe" measures putting up new money to deal with the crisis, the EU is now counting on highly indebted states such as Spain and Portugal to press ahead with deep austerity measures. Meanwhile, the EU is working to contain risks from spreading from the banking sector.
As a result, it decided to conduct a new round of stress tests on Europe's banks from February.
Olli Rehn, the top monetary official in the EU, said these will be "more rigorous and more comprehensive" than those conducted on 91 banks in July and will crucially assess a bank's liquidity position, which the earlier version did not.
"The scope and methodology of the exercise are currently under discussion but of course we will draw lessons from the exercise earlier this year," Rehn said.
Rehn would not say whether the results will be published in the same manner as those in July, but added that his preference was for full transparency - there have been some calls to keep the results under wraps and allow banks to sort out their finances away from the glare of publicity.
July's stress tests have come under criticism after the bailout of Ireland last month was predicated largely on revelations of worse financial problems afflicting its banks. All the Irish banks assessed in July were given a clean bill of health as only seven of the 91 banks tested failed.
Investors continue to fret about the financial health of many of Europe's banks and how they impact on governments' potential liabilities.
The most acute concerns center on Portugal and Spain, widely viewed as the weakest links in the 16-country currency union. Many analysts have warned that the region's existing emergency rescue fund would be too small to save Spain.
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