Europe can’t make up its mind on what it is going to do with its banking stress tests. Three weeks ago, the results were going to be systematically leaked. That started with positive news about Santander, the Spanish bank that has diversified out of Spain, which performed quite well in the stress tests.
Then, it was leaked that the stress tests didn’t include sovereign debt. This means that there wasn’t a stress test at all, rather a selective stress test focusing on the previous crisis’ core concern, real estate.
Now the German government is sending out “questionnaires” to banks prior to what is going to be a Europe wide stress test involving around 100 banks. What are these questionnaires asking?
“Would you like us to stress test you for sovereign debt? Or would you prefer we limit the test to things like real estate and corporate bonds?”
While likely these questionnaires are an important part of figuring out how to do the tests, they add to the entire mystery of this process. Mystery isn’t even the most worrying thing. It’s pace.
It has now taken over a month since this idea was mentioned to actually take proper and complete action on it. If it takes this long for the EU, ECB, and national banking and financial services authorities to run a stress test, how long will it take them to save a failing bank?
It seems unlikely today will see a serious announcement about how Europe plans to stress test, but it can only be better than the first failed attempt three weeks back.
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