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FINANCIAL SERVICES : SUPERVISORS PREPARE FOR CAPITAL SHORTFALL IN EUROPEAN BANKS.

At the Tatra summit in Brussels (an initiative launched by the Center for European Affairs, CEA), on 27 January, financial supervisors admitted the possibility of European banks having a capital shortfall, and pre-emptively said that the banking stress tests should not be judged by this.

Vitor Constancio, vice-president of the European Central Bank (ECB), said that the "success of the AQR [asset quality review] and the stress tests cannot and should not be measured by the amount and size of the capital shortfall that can be identified". This statement, alongside others made at the summit, seemed to suggest that capital shortfalls are to be expected, despite the results that banks have achieved over the last year to recapitalise ahead of the stress tests.

Vladimir Dvoracek, executive director of financial supervision at the National Bank of Slovakia, stated that "when we see the results of the AQR, we can expect some difficulties in the balance sheets of banks". The sentiment was echoed by David Vegara, deputy managing director of the European Stability Mechanism (ESM), who suggested that after the process of comprehensive assessment, "the banks will have to expand their capital base".

Warsaw's reservations

According to the new Polish Finance Minister, Mateusz Szczurek, the banking union as a whole "is not indispensable to Poland while it is not yet formulated or operational". "Poland needs a complete view of the way the banking union will function. We are treating the three pillars of the banking union as a whole, and we don't yet know what form common banking supervision will take," he told the Polish press agencyPAP on 27 January, in the margins of the Tatra summit on the economic and monetary union in Brussels. Nevertheless, the minister clarified that the structure and stability of the eurozone are "very important" to Poland because most Polish banks are owned by financial institutions in the eurozone. "Since Poland is not a member of the eurozone, it has its own system of deposit guarantees, which works well. We can therefore make the decision in full knowledge of the facts [...] Before the banking union is fully operational, we think that joining blindly doesn't make sense." Szczurek also said that certain aspects of the banking union were "not very useful" for his country. Furthermore, the minister reiterated Poland's reservations over rapidly joining the eurozone.

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Publication:European Report
Geographic Code:4EXPO
Date:Jan 29, 2014
Words:387
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