Brussels, 18/01/2011 (Agence Europe) - On Tuesday 18 January, European finance ministers looked at the bank stress tests that the European Union will be carrying out in the spring alongside purely national tests. Noting general agreement to learn all the lessons from the bank stress tests that have already been carried out at EU level, EU Internal Market Commissioner Michel Barnier promised that the tests would be tougher and even more credible. He set out a number of guidelines for the 2011 stress tests - full transparency about all the test results; examining sovereign risk and liquidity; uniform application; and when the results are published, a credible response from supervisors if restructuring is required. The time-line is not clear. The tests were initially announced for February, but will not be carried out until the spring with the results published by the summer.
Published in July 2010 (see EUROPE 10187), the results of the second batch of bank stress tests lost credibility when the Irish banks' woes forced the country to call for foreign aid, even though the country's two biggest banks had sailed through the tests. EU Economic and Monetary Affairs Commissioner Ollie Rehn said that the tests used in 2010 had been “solid” but had not been evenly applied in the member states.
Liquidity. The new stress tests will look at banks' ability to drum up enough cash in times of crisis on the markets. The introduction of such measures is complicated by the fact that there are not yet any harmonised criteria at EU level for calculating capital ratios and liquidity ratios. New international banking rules, known as the Basel III rules, which the EU will be incorporating into its legislation, set out ratios but do not explain in any detail how they are to be calculated.
Measures concerning the holding of sovereign debt (bonds) are to be fine-tuned, looking at the option of testing bonds held in the banking book rather than solely those in the trading book. Barnier stated that he had not said that this was necessary, but it is part of the debate, along with the option of examining property bubble risks. (M.B./transl.fl)