European Liberal Leader warns that the EU must prepare at stress tests follow-up plan
14 July 2010
Guy Verhofstadt highlighted that progress is being made in publication of stress tests on the 23rd July. He also called for transparency in methodology.
The Liberals and Democrats, the first political group in the European Parliament last year to draw attention to the importance of undertaking stress tests on European banks, is calling on the Council of Finance ministers tomorrow to prepare the ground carefully, both in terms of methodology and possible recapitalisation.
"The failure of the stress tests conducted in Europe during the summer and autumn of 2009 can only be explained by the disorderly fashion in which they were carried out by national regulators - their results only being known to national finance ministers which led to the international markets losing confidence in the prudential state of many European banks, as well as they themselves doubting the solvency of each other," said Guy Verhofstadt, ALDE group leader. "The EU cannot allow a repetition of this and must carry out this exercise transparently."
"Certainly we are making progress in the publication of a new series of stress tests on the 23rd July but no one except finance ministers knows what methodology is being applied to evaluate the banks. We should know this in advance of publication and how marks are attributed in proportion to liquidity."
"The worst case would be if the results of certain banking institutions are not solid enough to reassure the markets or their clients. In such a scenario it is essential that ECOFIN ministers affirm their political will to agree a Europe-wide plan, including the eventual mobilisation of the European financial stabilisation mechanism."
"This new situation highlights once more the absence of European banking supervision. A European supervisor would have been in a position to define a single methodology and prepare a European recapitalisation plan. I hope that the Council will take heed and agree a compromise on the package of financial supervision with the European Parliament by September."
The Committee of European Banking Supervisors (CEBS) - a coordinating rather than supervisory body at present - decided on 7th July that 91 banks, representing 65% of the sector in Europe, would be subject to stress tests (evaluated in 2010 and 2011) the results of which would be published on 23rd July. Amongst these banks, there are 27 Spanish institutions, 14 German and 4 French.
