Bank stress tests
July 13, 2010
Stress tests on 91 European banks, designed to gauge a bank's ability to deal with another economic or sovereign debt crisis, are to be made public for the first time on July 23, but EU finance ministers are still squabbling over what data to publish.
"The desire is to do it in the most transparent way possible, including by presenting the exposure of different institutions to sovereign debt," Belgian Finance Minister Didier Reynders, whose country holds the rotating EU presidency, told a news conference.
While France questions the need to fully publish exposure to sovereign debt and stressed the difficulty of establishing a harmonized tier one - or capital - ratio for European banks, Germany, Spain and Britain are in favor of full disclosure, according to the Reuters news agency, quoting unnamed sources.
Avoiding bankruptcy
EU ministers agreed that any bank pushed to the brink of collapse would be eligible for a state bailout, but with strict conditions attached.
"First, an institution which is in trouble should raise capital on the markets. If this does not work, the state should help. If the state is not in a position to do it ... the state can turn to the [rescue system], but only under the conditions which the rules impose," German Finance Minister Wolfgang Schaeuble said on Tuesday.
Some German and Spanish banks are seen as the weakest links in the European banking system. According to a study by PricewaterhouseCoopers, German banks had the highest number of bad loans on their books at the end of 2009, amounting to over 212 billion euros ($269).
Doubts over banks' abilities to clean up their balance sheets have hampered efforts to raise funding and made them dependent on liquidity provided by the European Central Bank in the wake of the global financial crisis.
New watchdog
There was greater progress on the establishment of a cross-border financial watchdog for Europe. Ministers handed Belgium a mandate to negotiate with the European parliament and hopefully achieve a vote in September, after British concerns over the power of such an institution were eased.
"The powers of the European agencies are focused on areas where there is dispute about a point of law, rather than allowing them to become involved in day-to-day supervision or second guessing the discretion of national supervisors," UK Finance Minister George Osborne said.
Britain, home to Europe's biggest financial sector, had insisted that a pan-European body should not interfere with member states' fiscal sovereignty.
Author: Nicole Goebel (Reuters/dpa/AFP)
Editor: Martin Kuebler