The closets of Europe’s banks will be examined next year, with increasing concerns about what skeletons might emerge.
Mario Draghi, President of the European Central Bank (ECB), is expected to outline the criteria for the bank’s Asset Quality Review (AQR), its stress-test of banks’ balance sheets, on Wednesday. This will be the first time that the ECB announces just how stringent its review will be.
There seems to be universal agreement that these tests are: a) very important and b) potentially damaging to a lot of banks. They will be one of the most important steps in the movement towards Europe-wide banking union.
Europe’s banks were at the core of the region’s three-year financial crisis, trapping their governments in a “debt spiral” of dependency. After falling victim to the global financial crisis, a large number of Europe’s banks needed propping up by their governments. To be able to afford this, the governments issued debt – making their finances shakier as a result.
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