Regulatory Realities: EU Banks to Use Common Metrics for Stress Tests
Financial regulations are all the rage in the political world right now, and Europe is going through its fair share as it prepares for banks to undergo stress tests and asset quality reviews in the coming months, Reuters reports.
It’s no secret that a plethora of banks in the European Union have debts that aren’t exactly favored to get repaid. A housing collapse in Spain and other woes across the bloc have left the economy stagnant and banks with a lot of questionable assets. But the EU is going to try to shore up that issue, and will put assets under the microscope later this year to ensure that its banks have enough cash available to cover the losses in the case of another economic downturn.
The European Banking Authority will look at areas ranging from shipping to mortgages. Most importantly, this time around, the banks will be given a single definition they are expected to use for bad loans, thus avoiding cover-ups or misleading reports due to regional variance. In 2011, it was found that Europe’s 70 largest banks only needed 106 billion euros all together, an unlikely number when Barclays (NYSE:BCS) in the U.K. alone has been asked to set aside in the ballpark of 13 billion pounds by next year alone, The Globe and Mail reports. This time, European regulators are hoping to play hardball.