Policymakers at the European Central Bank had initially hoped that the asset review would feed into the stress tests in part because it is difficult to measure the sturdiness of a bank without knowing precisely the contents of its balance sheet.
Please re-read the highlighted text as your humble blogger has been saying this since the beginning of the financial crisis.
Without ultra transparency, there is simply no way of knowing if a bank is sturdy, as in solvent, or unstable, as in insolvent.
Without ultra transparency, stress tests are meaningless.
Without ultra transparency, there is simply no way of knowing if a bank is sturdy, as in solvent, or unstable, as in insolvent.
Without ultra transparency, stress tests are meaningless.
1 comment:
If the Euro banks are like the American, they don't have to put their derivatives exposure on the their balance sheets; so, yes, "stress tests" are ridiculously incomplete.
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