Wroc³aw, 19/09/2011 (Agence Europe) - At their meeting in Wroc³aw (Poland) on Saturday 17 September, EU27 finance ministers and central bankers looked at how to improve the annual stress tests for banks in Europe. The governor of Poland's central bank, Marek Belka, said that the meeting had discussed how the stress tests had run, how they had been welcomed, and improvements to be made next year. The 2011 tests were tougher than the 2010 batch, but did nothing to prevent the latest round of panic on the money markets, where bank shares have plummeted to new record lows after fears about banks' exposure to the sovereign debt of struggling eurozone nations.
EU Internal Market Commissioner Michel Barnier mentioned two areas of improvement currently under investigation - ensuring the risk of sovereign debt is given more prominent a role and also increasing the funding that banks are required to have behind them. Barnier's circles are looking at whether the bank capital requirements currently in force (the Basel II requirements) should be used or whether the new Basel III requirements should be incorporated directly. The size of the dataset is also being discussed.
The Spanish finance minister, Elena Salgado, said that the ministers had recognised that people needed to have greater confidence in the tests and European banks needed to gradually increase their capital.
The ministers examined measures taken in the public and private sectors since the publication of the stress test results in July 2011, particularly in countries whose banks failed or only scraped through the tests (see EUROPE 10420 and 10421). The failed banks and borderline cases have until 15 October 2011 to provide details of how they are planning to increase their capital base.
The discussions focussed on a report from the Council of Minister's Economic and Finance Committee (EFC) describing a marked improvement in the 2011 stress tests, compared with 2011. The report notes that of the €200bn raised by European banks in recent years, €50bn was borrowed in the first half of 2011. Member states' finance experts say that the 2011 results do not show the unsustainable high levels of struggling countries' bonds held on the balance sheet. Although the credibility of the public and private consolidation measures is not doubted, the report notes that the stress tests had not restored confidence on the markets.
The EFC lists potential improvements to the stress tests: - carrying out the tests on a faster basis to ensure that the tests are not overtaken by circumstances; - ensuring greater coherence in the coverage of bank assets at national level; - minimising the risk of banks challenging the scenarios and withdrawing from the tests; and - improving coordination of national and European supervisors. (MB/transl.fl)