EU commences bank stress tests

| March 7, 2011
”EU

The EU has commenced a new round of stress tests after last year’s failed to reveal the weakness among banks in Ireland.

The latest tests, which will be headed up by the new European Banking Authority (EBA), are expected to be tougher and may include a liquidity test.

However, regulators have yet to agree to a system, including whether to consider a Government debt default.

Banks that fail the tests would be required to boost their capital ratios – the core measure of a bank’s financial strength.

Banks can strengthen their ratios by cutting back on lending – but this can cause a drag on their economies.

The results of the tests will be published in June.

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