Speech by Sharon Bowles MEP on stress tests and the EU banking sector
Bank crisis resolution is being elaborated at an international level and there are also important competition issues to address, but this does not mean everything has to wait, in particular when we have a combined sovereign debt and banking crisis.
Last year's tests were weak, we said so then and have repeatedly said bank stress tests must be credible, robust and transparent. Indeed we need a whole lot more banking transparency in general. I suggest we take a lesson from the US and Dodd Frank which requires disclosure, with a two year time lag, of the US Fed's liquidity provision. There are European names in theUSdisclosures and it would be an altogether healthy thing for EU central banks to follow suit with similar disclosure about support in 2008 and 2009 as an accompaniment to the new stress tests.
Now these new stress tests are improved under the EBA, but there are still issues being avoided due to guarding and prevarication by Member States. It is about time the message sunk in that feeble political will is not the answer to this crisis and makes solutions more expensive.
Why try and hide the full level of exposure of banks to sovereign debt, especially when we all know the likely reality. And there really is no excuse not to stress the banking book - various assets got parked there under the heading of hold to maturity that would have been moved if they had not lost value.
Of course analysts in the market are well able to read across from stress tests and other information to make an estimate at what is going on in the banking books, but a darker interpretation - including on to Member States themselves - will be cast by the fact thatMemberStatesand supervisors were not bolder in coming clean.
Meanwhile actions are being provoked by the stress tests: banks are seeking capital, some Member States are being pro-active in pushing banks to raise capital, but there is no overall plan to address undercapitalisation. This does not stack up - surely one thing we have learned in the crisis is that we are interconnected. If banks do not trust one another and the interbank lending is frozen, we have a big problem - so please can we have proper, disclosed coordination of the response.
But lets not dodge the elephant in the room - this is not just about banks, it is about sovereign debt and the stability of the Euro. Inextricably linked, overwhelmingly important.