European Union banks that do not pass the next round of stress tests and need to secure more funding will have no further recourse to public money, the EU’s antitrust chief told a German newspaper.
“It will not be possible to resort to public money again,” Joaquin Almunia, the European commissioner in charge of competition policy, told businessweekly VDI nachrichten.
“If there are banks that are close to bankruptcy, they must be wound down, and indeed exactly according to the new rules.”
In a policy shift, Europe overhauled the rules covering state aid to struggling banks last Wednesday, putting the burden for restructuring them on to shareholders and junior debtholders.
The European Banking Authority (EBA) is preparing for another round of stress tests in the second quarter of 2014, that will examine how well the EU’s banks are placed to respond to economic and financial shocks.
The focus of the next test will be on seeing that banks are taking steps to implement Basel III, the global accord requiring them to hold more and better-quality capital and cash buffers.
In 2011, the EBA told the sector collectively to raise 106 billion euros by mid-2012, but many analysts and commentators argued that this was still not enough. ($1 = 0.7821 euros)
“We must create trust in our banking system, so we should welcome the stress tests,” Almunia was quoted as saying. Source: Reuters