EU finance ministers have Wednesday agreed on the broad outlines of another stress tests on major European financial institutions. I’m not really sure what happens during an European Stress Test, but it seems to make a lot of people happy. Perhaps it’s some kind of big party – like a festival, or something. Anyway – I’m sure it will be fun.
“The euro zone debt crisis could last another ten years.”
Gyorgy Matolcsy
And this years stress test will be even better than last year, when they somehow forgot to invite the Irish, the prominent people of Brussels promise. But, like last year, the organizers are not sure if they will tell us all about it, or not.
Please forgive the sarcasm, but if the new European Banking Authority is going to be taken just a little bit serious, the stress test has to be conducted with total transparency.
Nothing less will ever be able to restore the lost confidence in this maneuvers.
“We are going to draw the lessons by making the next tests more rigorous and even more credible,” says internal market commissioner, Michel Barnier, at the end of a two-day meeting between Europe’s economy chiefs in Brussels.
The new stress tests will this time also take into account underlying capital, liquidity and exposure to sovereign debt.
In July last year, the financial strength of 91 institutions was tested against potential crisis situations. Only seven failed the examination.
The methodology this time, which will imagine even more severe crisis situation, notably in property markets, has yet to be agreed upon, but will be undertaken by the new European Banking Authority, with ministers expecting the tests to be completed by the end of May.
The level of disclosure once the results are concluded however remains a point of division amongst ministers.
The new test comes as Portugal, currently in the euro zone’s sovereign-debt emergency room, sees increased pressure on its bond yields, with rates climbing on 10-year bonds to 6.951 percent, shy of the seven-percent level thought to be the tipping point for the country to request a bail-out.
Meanwhile on Tuesday, the Hungarian EU presidency enjoyed renewed opprobrium from other member states when the country’s finance minister made the gaffe of publicly saying the euro zone debt crisis could last another ten years, the EUobserver.com reports.
Mr. Gyorgy Matolcsy made the comments during the public, televised portion of the meeting of EU finance ministers.
There is a likelihood “that the euro is endangered for another decade,” he says.
Well, that’s just what I pointed out in my commentary on New Years Eve.
Related by The Swapper:
- Saxo Predicts Public Debt Catastrophe, Insolvent Banks
- EU: No Bail In, Just Eternal Bailouts
- The EU Stress Test: Working The Media
- European Bank Stress Tests Are Loosing Credibility
- All Nordic Banks Will Pass Stress Test, Nordea Says
- Norway: Most Banks Fail In Stresstest
- Stress Level Rising In Europe; Some Banks Might Not Survive
- EU Stress Test May Trigger Capital Injection Of EUR 85 Billion
- Barroso: EU Has Survived The Economic Crisis
- People’s Confidence In The EU Drops To Record Low
Related Articles:
- EU Looks to US for Advice on Bank Stress Tests (abcnews.go.com)
- Euro-Zone Aims for Fund Increase (online.wsj.com)
- EU to include liquidity in bank stress tests (theglobeandmail.com)
- EU Pledges Tougher Stress Tests, Seeks Bonus Curbs (businessweek.com)
- Europeans Vow to Get Tough on Bankers Pay (nytimes.com)
EconoTwist's 
Norway Consider Veto EU’s Bank Deposit Guarantee Directive
The Norwegian government is considering to use its veto against a new EU directive, setting a limit to the European banks deposit insurance guarantee. The proposed limit is EUR 100.000. The Norwegians banks, however, guarantees for up to EUR 250.000 of private citizens bank deposits. Norwegian minister of finance, Sigbjørn Johnsen, refuse to accept the upcoming regulations from Brussels, and says that he is considering using Norway’s right to veto any new EU directives for a period of 12 months if an agreement is not possible. If that turns out to be the case, it will be the first time Norway use its veto rights in the EU parliament.
“Yes, the veto is even considered. But the main track is to get through with our views.”
Sigbjørn Johnsen
Norwegian minister of Finance, Sigbjørn Johnsen, met on Thursday afternoon with the German MEP, Peter Simon, who is preparing the new EU directive on bank insurance guarantees for the EU parliament. Mr. Johnsen also met with MEP Burkhard Balz. “They were both nice guys,” Johsens says. “They fully understand the arguments we have, but time will tell if we get through with our case.” the experienced minister adds.
Mr. Sigbjørn Johnsen was also minister of finance in the early 90’s, and was the one who had to deal with the Scandinavian bank crisis in Norway.
In an interview with the Norwegian newspaper “Nationen,” Friday, he says the Norwegian government will consider using its veto rights to block the upcoming new EU directive on European banks deposit insurance guarantee.
That’s about the above the average guarantee in most European Area countries, but Norway has the highest deposit guarantee of all, equal to about 250.000 euro.
The directive is being processed by the European Parliament at the moment, and EU’s Finance Committee is scheduled to submit its recommendations March 17.
According to Johnson that means that all political groups will conclude on the case by the end of February.
The newspaper Nationen also writes that Norway plans to contact several other groups, not just the Social Democrats and Christian Democrats – who are the two largest political parties in the EU parliament.
“What we’re doing now is using all the relations we have inside the EU system. When the EU finance commissioner, Michel Barnier, comes to visit Norway later on this winter, it will also be on the agenda. We have to see what the final result is. Then we’ll decide what to do – or not to do,” Johnsen says.
“Is it a veto relevant?”
“Yes, the veto is even considered. But our main track is to get through with our views.”
Fear of Flying Money
EU finance commissioner Michel Barnier has on several occasions said that he EU worries about the Norwegian deposit guarantee, that it will result in a flight of capital.
The possibility that such movements of small deposits, followed by large deposits, might lead to a domino effect of falling banks, according to the EU.
However, Mr. Johnsen argues that an investigation of capital movements between the Nordic countries show that the Norwegian insurance scheme, (which is substantially better than in the other Nordic countries), do not have anti-competitive effects.
A Bank Champions League
To will protect bank customers.
To make it easier for the regulators to shut down a bank, who actually should have been closed, as customers know that their deposits are protected when the bank declare bankruptcy.
Lastra believes it is important to figure out how large national banks, with branches in several countries, both in and outside the EU, should be handled.
She proposes a “Champions League” solution, in which large international banks have an EU deposit guarantee, while the national banks have a national deposit guarantee.
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