European Commissioner Olli Rehn issues blunt warning to banks over stress tests

Wednesday 06 November 2013 22.36
Olli Rehn said stress tests will be tougher than those of 2010
Olli Rehn said stress tests will be tougher than those of 2010

European Commissioner Olli Rehn has given a blunt warning to banks in the eurozone that upcoming stress tests will be "effective and credible".

Speaking in Brussels, Mr Rehn said that an examination of the banking sector in 2010 suffered from what he called "financial nationalism" in which supervisors in countries such as Ireland were incentivised to hide problems.

Mr Rehn said it is "crucial" that upcoming banking stress tests to be led by the European Central Bank will be "much more competent and convincing" than work carried out in 2010.

Quoting Professor Nicolas Véron of the Brussels-based think-tank Bruegel, Mr Rehn said the 2010 tests suffered from "financial nationalism" in which national supervisors in countries such as Ireland, Spain and even Germany had the incentive to hide problems.

With the European Central Bank scheduled to take over the supervision of eurozone banks next year, Mr Rehn said he believed the approaching stress tests would ensure there are healthy banks in the eurozone area.

In unusually frank language, Mr Rehn said ECB President Mario Draghi has "a very strong incentive not to receive any crap in his hands when he has to be responsible for bank supervision in Europe" next year.