One thing has been clear since the European Central Bank was empowered as top supervisor for eurozone banks at the June 2012 EU summit. Before the ECB would assume responsibility as the euro area’s lead bank supervisor in November of this year, 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.
So it was timely for The Economist at the beginning of this year to look at the euro area’s negative legacy regarding bank stress tests. In an article titled “Setting the exam,” it reminded its readers, “Stress tests have had an inglorious history in Europe since they were introduced in the wake of the financial crisis along with new institutions such as the much-scolded EBA, which has the job of harmonizing bank regulations and coordinating national supervisors across the 28-country EU.”
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