Comments on: Clarity important for Europe stress tests http://blogs.reuters.com/great-debate/2009/05/15/clarity-important-for-europe-stress-tests/ Thu, 21 Jul 2016 07:57:19 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: cbusette http://blogs.reuters.com/great-debate/2009/05/15/clarity-important-for-europe-stress-tests/#comment-15104 Fri, 22 May 2009 16:27:55 +0000 http://blogs.reuters.com/great-debate/?p=3480#comment-15104 Central bankers in Europe are significant political actors who derive much of their independence from providing the regulatory and monetary infrastructure that allows banks to thrive. Given their political heft, it is not surprising that across Europe, central bankers are not embracing stress tests, especially pan-European stress tests. Engaging in transparent stress tests and publishing results will inevitably lead to political contestations that will have the potential for embroiling central banks in political tussles. So when European central bankers either believe that bank stress tests are useless or that they do not need to be performed at an individual bank level, they are engaging in a politically defensive move.

This is understandable if one believes that the external environment will correct enough to provide an exogenous boost, but highly risky for three reasons. First, the absence of stress tests at the individual bank, country, and regional levels may make it very hard to spot co-varying risks across banks and the region. Should there be any additional shocks, exogenous or otherwise, the banking sector will indeed become the subject of political competition and the central banks will not be spared involvement.

Second, it may be very difficult for distressed European banks to raise significant additional capital after this period because of a persistent lack of confidence in some European banks. These two preceding scenarios are not particularly far-fetched given the less than ideal conditions across Europe for high margins on deposit-taking activities.

Finally, a lack of interest in stress tests and in coordinating stress tests across Europe, provides the banking lobbies, who have proven themselves very adept at maneuvering within short political calendars, with an opportunity to reassert themselves. This could create the latitude for an additional variety of poorly regulated practices. And we know where that has led us.

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By: gd http://blogs.reuters.com/great-debate/2009/05/15/clarity-important-for-europe-stress-tests/#comment-14766 Sun, 17 May 2009 23:41:41 +0000 http://blogs.reuters.com/great-debate/?p=3480#comment-14766 HOW’S THIS FOR CLARITY. Tim and Ben should tell the companies that capitalism is not gambling and that current pension obligation should be fully funded. Not left for possible future profits to pay for. NOT LIKELY

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By: GD http://blogs.reuters.com/great-debate/2009/05/15/clarity-important-for-europe-stress-tests/#comment-14688 Sat, 16 May 2009 07:50:20 +0000 http://blogs.reuters.com/great-debate/?p=3480#comment-14688 ARE YOU FOR REAL! The US stress test was your idea of clarity and transparency. You must be the sort of guy that Tim an Ben where looking for ie living in the dark uner a mushroom and enjoying being feed bulshit !
Clarity and transparency would be the banks opening there books to the public. ( Yes mate the guys that re bailing them out and keeping them in there excessive lifestyles! ) Thats Transparency ! Open it all up show the world if there is nothing wrong with there balance sheets. NOT LIKELY ! SO MUCH FOR TRANSPARENCY

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