2011 Stress Tests Much Tougher Than Last Year’s, Say German Banks

The Association of German Banks regards the tougher EU-wide bank stress test scenario for 2011 as an appropriate measure. “The benchmark is higher in many respects than last year,” said Michael Kemmer, the association’s general manager. “The criteria have been toughened considerably in some cases, and that is a good thing.”

The sssociation welcomes that the European Banking Authority (EBA) regularly measures the resilience of the EU banking system by means of stress tests.

At the same time, the results should not be overrated. “The stress tests give supervisors important information about the banking system, but they don’t say whether individual banks have a sustainable business model,” Kemmer added. The results therefore had to be prepared very carefully to avoid producing unwanted side effects. “We should thoroughly analyse the results and examine which measures are necessary on a case-by-case basis.”

As the stress test scenario was a hypothetical one, it would, however, be fundamentally wrong if the results were to automatically trigger action resulting in higher capital requirements for banks.


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