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01 November 2013

Financial World: Step up and be counted (Graham Bishop article)

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The asset quality review to be conducted by the ECB will have direct impact on the operations of European banks, explains Graham Bishop.

The Single Supervisory Mechanism (SSM) is about to come into law (now the UK has stopped dragging its feet). This takes the European Parliament another step towards cementing its role as the location of “accountability” for Europe-wide financial matters as it will receive a “comprehensive and meaningful record” of supervisory board meetings, as well as the right to grill the board’s chair. What it means for the rest of us is that a Banking Union is now being created in the euro area – a massive political advance.

The media are obsessed with the intricacies of the Single Resolution Mechanism (SRM) but this is largely irrelevant to the vital developments planned for the next 12 months, or so. These include agreement on the single rulebook and a unified supervisory model.

What will matter for Europe’s banks in the short term, and have a direct impact on their operations, is the asset quality review (AQR) that will be a major component in judging whether they are sufficiently capitalised. The ECB has to check the asset quality behind 85 per cent of the euro area’s deposit base. If some of the banks come up short, the question is who will make up the difference.

Please click on the PDF link below to read the full article

© Financial World

Documents associated with this article

42 Graham Bishop_FWNov2013.pdf

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