Local view for "http://purl.org/linkedpolitics/eu/plenary/2011-05-10-Speech-2-715-000"
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"en.20110510.68.2-715-000"2
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Mr President, Commissioner, it is time to carry out European stress tests that are transparent, flexible, reliable and effective: their quality and credibility are a necessary contribution to financial stability and the reestablishment of market confidence.
Stress tests are an essential supervisory tool for evaluating the specific solvency of individual banks and the ability of the system as a whole to withstand stress. The intention of their design and implementation is to calculate how banks would withstand stress under certain adverse conditions, and to detect risks of contagion in order to prevent a domino effect that could lead to collapse.
The European Union has prior experience with stress tests, carried out by the Committee of European Banking Supervisors (CEBS). The experience dates from May 2009, when the Ecofin Council mandated the CEBS to organise stress tests on the financial system, in cooperation with the European Commission and the European Central Bank. The goal was to have a level of aggregated information on the ability of the European financial system as a whole to withstand stress, and they focused on the 22 largest banks. The results were not made public, because the market was very sensitive, it was said at the time. All that was released was a methodology providing for three outcomes – the best, average and worst – and the purpose of the tests was not market transparency.
During their development, in July 2009, guidelines proposed by the Commission on state aid were adopted, establishing that banks needing financial aid to tackle the crisis should also be subjected to stress tests. On 1 October 2009, the aggregated results were sent to the Ecofin Council, which, on 2 December that year, asked the CEBS to provide it with information on the strength of the banking system, for which new stress tests would be carried out.
The results of these stress tests carried out by the CEBS were published, in line with the European Council’s June 2010 guidelines. They affected 91 banks in the European Union, but were criticised because they lacked a European focus, because each country decided which banks should be subjected to the tests, because the scenario was different for each country, and because the information provided was often incorrect; we all remember the case of Ireland and the lack of information on some aspects of the exposure to sovereign debt of some countries’ banks. Despite improving the perception of some Member States, all this did not succeed in re-establishing confidence within the European Union.
These are the circumstances in which the time has arrived to suggest a new round of stress tests, but in a totally different situation, with new European supervisory authorities. For the first time, there is a new European supervisory framework with experience of the two previous tests, enabling the promotion of transparency, the promotion of reliability and, clearly, the promotion of effectiveness, which is the key aspect of these third tests.
Obviously, the first thing we want to know is what will be done to prevent the errors made in the two previous tests. Secondly, we want to know what will be done to cover and capture the potential for significant risk in all the Member States. Adequate diagnosis is necessary. The method also needs to be developed in line with the banks’ various business models and structures, so the stress tests need to be able to provide the information needed to take appropriate action.
This is a very important time, because the new financial supervisory authorities are starting to operate. On 18 March, the European Banking Authority published an executive summary containing the methodology, and we would like to know, when the European Council thought that the information should be published, what measures…"@en1
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