European banking supervisor faces rough stress test

european banking supervisor faces rough stress test

The test will serve as an assessment of how crisis-proof the banks are now, nowotny said on friday at the presentation of the financial market stability report in vienna, according to a report by the APA news agency. This stress test will be carried out in coordination with the european central bank (ECB) and the existing supervisory authority, the european banking authority (EBA).

There is a reason for the joint action by the ECB, for the banks in the eurozone, and the european banking authority (EBA) for the other banks of the total of 27 EU member states: the aim is to avoid isolated stress tests by the ECB and the EBA, nowotny said.

The new european banking supervisory authority at the ECB will be installed in stages starting in 2013; it is expected to be fully operational in march 2014. The ECB directly is to be responsible for financial institutions with a balance sheet total of 30 billion euros or more, europe’s finance ministers agreed this week. But if necessary, it can act on all of the more than 6,000 banks in the eurozone. About 150 banks were allowed to be covered by direct ECB control, but they accounted for 85 percent of asset holdings.

The "chinese walls" for the planned separation of monetary policy and supervision will be built by a new supervisory board at the ECB, which will be responsible for central banking supervision. As things stand, bank supervisors will sit on the board, supplemented by non-voting representatives of the central banks, it was reported in vienna.