ECB gives details of stress test action plan

FXstreet.com (Barcelona) - The ECB unveiled on Wednesday its plans regarding EU banks' stress tests. According to the official release, the review of balance sheets would begin as soon as November in order to detect potential dangers as early as possible and to make way for the creation of the banking union in the area.

130 European financial institutions will be subject to stress tests, asset reviews and risk evaluation actions with the aim of reaching three main goals, listed in the ECB paper: “transparency – to enhance the quality of information available on the condition of banks; repair – to identify and implement necessary corrective actions, if and where needed; and confidence building – to assure all stakeholders that banks are fundamentally sound and trustworthy.”

The banks which will undergo stress tests will also be obliged to set aside 8% of their capital as a buffer against losses. “We want the exercise to encompass all the main sources of risk,” the head of ECB’s financial stability directorate Ignazio Angeloni said today in Frankfurt.

Meanwhile, ECB President Mario Draghi stressed in a statement that the stress tests are "an important step forward for Europe and for the future of the euro area economy."

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