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.
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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