There is a lot of uncertainty about the stress tests on European banks, the results of which are due to be announced on July 23. The question is whether the tests will be stringent enough to have credibility with investors or will be regarded as a whitewash.
I am not sure the statement issued on Wednesday by the Committee of European Banking Supervisors identifying the banks gives a great indication, but some details in the FT story are reassuring as to the exercise’s seriousness.
The problem with the exercise is that CEBS is setting central guidelines for the tests but they will be carried out by national supervisors that have conflicts of interest. As I noted the other day, regulators will not want to declare banks undercapitalised if their own governments will have to pick up the bill. Read more