Acharya V., and Steffen S., (2014), “Falling short of expectations? Stress-testing the European banking system”, Voxeu, 17 January.
The Single Supervisory Mechanism – a key pillar of the Eurozone banking union – will transfer supervision of Europe’s largest banks to the ECB. Before taking over this role, the ECB will conduct an Asset Quality Review to identify these banks’ capital shortfalls. This column discusses recent estimates of these shortfalls based on publicly available data. Estimates such as these can defend against political efforts to blunt the AQR’s effectiveness. The results suggest that many banks’ capital needs can be met with common equity issuance and bail-ins, but that public backstops might still be necessary in some cases.
Relevant Posts
- Perotti, Enr., (2014), “The roots of shadow banking” , Voxeu, 16 January.
- Gros, D., (2013), “The European Banking Disunion”, Project Syndicate, 06 November.
- Den Haan, W. ed., (2013), Forward Guidance: Perspectives from Central Bankers, Scholars and Market Participants – A VoxEU.org eBook, London: Centre for Economic Policy Research.