ECB is Concerned about Market Confusion over Stress Tests

The European Central Bank is concerned that investors could be spooked by next year’s bank balance-sheet reviews and stress tests unless their results are carefully timed.

As the ECB prepares to take over supervision of all euro-area lenders in 2014, it will begin a three-phased analysis of the institutions coming under its umbrella. As laid out by Executive Board member Yves Mersch last month, the bank will start with a risk review before analyzing banks’ balance sheets and conducting stress tests in collaboration with the London-based European Banking Authority.

Now central bankers are wrestling with how to move through the exercise without releasing conflicting numbers at different times, particularly for banks that aren’t in good health. ECB Executive Board member Peter Praet and Governing Council member Ewald Nowotny said this week that the two organizations must avoid giving different estimates of how much extra capital banks will need to raise.


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