Regulator defends itself against bank 'stress tests' attack

9th March 2011, Comments 0 comments

European banking regulators moved Wednesday to downplay reports that some of the new "stress tests" on banks due later this year would be less strict than those carried out in 2010.

The Financial Times (FT) reported that the European Banking Authority would soften parts of the tests. But an EBA spokesperson said that regulators were still carrying out a consultation process and that the FT had put its interpretation on documents sent to banks awaiting their feedback.

Citing the documents, the FT reported Wednesday that the new tests would simulate the impact of a drop of 15 percent in equity markets, compared with the more stringent 20 percent worse-case figure used in last year's test.

In response, an EBA spokesperson told AFP: "There is still a debate going on and important technical aspects have still to be sorted out."

The report comes two days after EBA chairman Andrea Enria told the FT he was in fact preparing a 'near fail' category to make the tests more credible and to use it as a trigger for a thorough recapitalisation of Europe's weakest banks.

The EBA was set up to replace the much-criticised Committee of European Banking Supervisors, which lost credibility after Ireland was forced to seek a bailout to save its two main banks despite them passing the 2010 stress tests.

A senior London-based bank analyst told Wednesday's FT: "There is nothing in what has emerged to change the market's views about this process. It was a joke last time. Why is it not going to be a fudge this time?"

© 2011 AFP

0 Comments To This Article