Local view for "http://purl.org/linkedpolitics/eu/plenary/2011-05-10-Speech-2-716-000"
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Mr President, I thank Mrs Wortmann-Kool, Mrs Bowles and, just now, Mr Sánchez Presedo for their three questions concerning an extremely important subject, namely the credibility of the stress tests for banks.
5. The dissemination of the methodology prior to the publication of the stress test results will improve the general credibility of the exercise.
6. Finally, coordination among the national authorities responsible for applying what we call ‘backstop’ solutions, which are to be imposed on banks that fail this test, has been significantly enhanced and improved.
That is the progress that has been made, the improvements on last year’s tests that you quite rightly hoped for and which have been made this year.
A second point that I would make, honourable Members, is that we must have much more clarity on exposures in relation to sovereign debt. Several of you – in particular, the Group of the Alliance of Liberals and Democrats for Europe – asked me about the methodology applied in this context, as Mrs Wortmann-Kool did just now. The adverse scenario proposed by the banking authority, the EBA, envisages a significant shock in the form of price fluctuations of sovereign debt and the cost of its financing.
As you noted, however, this scenario does not extend to cases in which repayment of sovereign debt is defaulted on. This is because the shock envisaged by the EBA would only have an impact on sovereign debts held in the banks’ trading book.
Nevertheless, there is an explanation behind this choice that was made this year. I would repeat that the stress tests simulate extreme scenarios, but ones which must nevertheless be considered plausible. Today, in the context of the recent introduction of the new European Financial Stabilisation Mechanism and the European Financial Stability Facility, which provide several governance tools for the euro area, we think, quite reasonably – and the European Banking Authority thinks so too – that it is much more useful now to ensure complete transparency of exposures relating to sovereign debt as they appear in the banking book and the trading book. The dissemination of these will therefore be much more detailed than last year.
Thirdly, you have also drawn our attention to the need for more consistent implementation of stress test scenarios throughout the Union. This is indeed essential for the credibility of the exercise. The Banking Authority is making considerable efforts by carrying out a strict assessment of the results of this exercise. This will ensure consistency between the methodologies applied by the banks as well as a convergence – an appropriate one, I think – of the ways in which the macroeconomic scenarios are retranscribed into parameters of respective risks. This approach does not prevent the banks from reflecting certain specific aspects of their trading book or a particular management model.
There is another element which is essential for the consistency of the exercise: the use of common definitions for the capital thresholds according to which the participating banks will be assessed. The reference for capital announced by the EBA is based largely on the current provisions of the Capital Requirements Directive, which already takes into account the different banking structures and the management models which exist in Europe.
Fourthly, Mrs Bowles and other speakers asked us about the differences in coverage of the banking sector within the Union. The Banking Authority has tried hard to develop a sufficiently representative sample, both at national level and across the entire European Union, whilst ensuring that the exercise remains manageable. Honourable Members, the banks tested during the 2011 exercise account for 65% of the European banking sector in terms of total assets. In each Member State, the sample was determined in such a way as to cover at least 50% of the total assets of the national banking sector.
With that, I come to my fifth comment, mentioned by Mr Sánchez Presedo in particular, concerning the question of the corrective measures – the backstops – that banks could expect if they turned out to be vulnerable or potentially undercapitalised. These banks will have to implement appropriate measures to remedy their weaknesses and above all to turn to the private sector by financing themselves directly from the markets or by selling assets. If, and only if, these measures turn out to be insufficient, public support could be envisaged, on condition, of course, that it conforms to the European State Aid Regulations. My colleague Mr Almunia and his entire team are working upstream with the Member States on this very question.
Honourable Members, we are in a situation where the financial industry is slowly recovering from this crisis, an unprecedented struggle – even though, for some banks, the crisis already seems to be over. We have not yet learned all the lessons from this, and we are all engaged in an important legislative task.
If public support is needed, the banks benefiting from it should, pursuant to the December 2010 communication on the application of State Aid Regulations to support measures in favour of banks, provide the Commission with a restructuring plan which is appropriate for dealing with the problem, in order, in particular, to consolidate and restore their long-term viability.
Finally, you quite rightly hoped for a strategy to recapitalise and restructure failing banks, as Mrs Ferreira proposed in her report on crisis management. As you know, we are working, honourable Members, on a legislative framework on the management of the crisis, the banking resolution, which we have had the opportunity to discuss several times. My aim is to give supervisory bodies and the future resolution committee for these cross-border institutions a toolbox in order to take preventative measures and to prevent risks that are diagnosed fairly early on from turning into crises, and to prevent the crises themselves from turning into catastrophes.
Therefore, to ensure – and to finance, if necessary – early intervention, and to ensure that the banks pay for the banks: that is what we consider to be an orderly resolution, and I intend to present this proposal both to the Council of Ministers and to you yourselves before the end of the summer.
Those are the technical responses that I wanted to provide, in as precise a manner as possible, to the three extremely relevant questions that were asked at the beginning of this debate.
In order to get to grips with this crisis and the lessons that we must learn from it, we need a supervisory framework, and we have had one since 1 January, thanks to you in particular. We need tools for anticipating problems as well as better governance in each of these establishments. We also need better capitalisation, and we will come back to that. Then, we should be measuring, taking the temperature, constantly taking the pulse. That is why, as some of you said just now, we need reliable measuring instruments. The stress test is a key measure and a key tool in this context, and not only have we discussed it here, we have also discussed it on many occasions – and as recently as April, in fact – with the finance ministers in the Council.
As you said, last year’s stress test was clearly insufficient, and the Commission itself has said this on numerous occasions to the new supervisory authority, the European Banking Authority (EBA), which coordinates the test in cooperation with national supervisory bodies. You are therefore right to wonder about the quality and, I would say again, the credibility of the new 2011 tests, which began a few weeks ago in April, and I would like to respond to your questions and to give you our analysis on five points.
Firstly, as you wanted, the stress tests for 2011 have undergone genuine improvements, particularly in six areas that I would like to inform you about briefly.
1. The adverse macroeconomic scenario that is applied simulates conditions much more severe than those of the 2010 scenario. Among other things, it adds severe real estate shocks, as well as an explicit impact on the cost of financing.
2. The coherence of the exercise has been very significantly improved thanks to a consolidated methodology upstream and a strict assessment subject to the adversarial principle downstream; in other words, peer review.
3. Under the principle of increased transparency, the dissemination of the results in June will be improved and accompanied by a separate detailed publication of the bank balances. That will also include the dissemination of sovereign debt holdings as well as capital structure.
4. The banks will also be tested on the basis of an upper capital threshold, core tier one."@en1
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