After the bank stress tests, ECB backroom tension lingers

The surprisingly positive outcome of the ECB’s health check for German banks may be something of a reprieve for the strained relations between Germany and the evermore- powerful European Central Bank under its controversial Italian president, Mario Draghi. But for the ECB, the real stress and tests are yet to come for the supervisor tasked with making hard decisions with far-reaching consequences for member states, their governments, and their financial sectors.

Berlin’s political leaders had not expected that Germany’s banks would come out at the top of the health check ahead of the launch of unified banking supervision in the euro area. On the one side was the common view that with the ECB empowered as top eurozone bank supervisor, a comprehensive health check of bank balance sheets and a tough stress test in cooperation with the London-based European Banking Authority would be needed.

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