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STRESS-TESTS: EU FINANCIAL REGULATORS COMPLY WITH POLITICAL BIAS MORE THAN BASEL II

basel carnival.jpg
Stress-tests are supposedly harmonised, at least for banks in the banking sectors of each country, but not across all EU member states, to test for shocks to a country's banking system when current risk assessments are suddenly inverted by falls in investment, in consumer demand, savings, loans, and by fast rising long term bond yields, and when presumably wholesale financial markets become 'one-way' (either buy-buy or sell-sell)!  The indicator values of sudden change are provided by the EU regulatory authorities, but in a narrative form and using an abstractionist, sometimes over-coy, language that is farcical.

This is not how the CRD and BIS Basel II regulations and guidelines specified the laws for this.

In the original regulations, stress-test calculations are expected to be conceived by the banks from their own macro-economic models including their own models of their banking sectors and of how and where their banks fit within those sectors. Instead, the regulators of today provide precise values by which asset class prices and some macro-economic variables are expected to adversely move according to a shock scenario, according to a narrative that cannot make sense to bankers or economists! Moreover, they do not provide models for how to assess the whole scenario. Consequently, banks must assess balance sheet impacts on a line by line basis and not worry about whether the overall picture or its timeframe is realistic or if there are allowances for effective risk mitigations, merely the summing of capital losses (nominal, as if crystallised instantly in full).

The reason for this is that banks proved to be extremely reluctant to invest time and resources in building macro-models of their business and of their banking sectors, largely because they also wished strenuously to avoid accepting responsibility for what happens in  underlying macro-economies, nationally and internationally. They are suspected of being likely to game any degrees of freedom given to them to try and intelligently work it out for themselves. This way no one will learn anything new and really useful.

THAT ARMAGEDDON SUMMER OF 2010 Lessons for LTRO2 in 2012

 

THE SEQUENCE OF EVENTS ON ASYMPTOTIX

 

SECRETS LIES & SMOKE AND MIRRORS

STATEMENT OF THE MEMBERS OF THE EUROPEAN COUNCIL 30 JANUARY 2012

TOWARDS GROWTH-FRIENDLY CONSOLIDATION AND JOB-FRIENDLY GROWTH

Over recent months, there have been tentative signs of economic stabilisation but financial market tensions continue to dampen economic activity and uncertainty remains high. Governments are undertaking strong efforts to correct budgetary imbalances on a sustainable basis but further efforts are needed to promote growth and employment. There are no quick fixes. Our action must be determined, persistent and broad-based. We must do more to get Europe out of the crisis.

The EBA details the EU measures to restore confidence in the banking sector

EBA: 26 October 2011
The European Banking Authority (EBA) supports the agreement at EU level on measures to restore confidence in the banking sector. These measures form part of a broader package aimed at addressing the current situation in the EU by restoring stability and confidence in the markets. Their implementation is conditional on the other components of the package being fully clarified and endorsed.

Political Economy: Social Democracy in Europe: The Commission and the European Banking System

wire man

 

version TWO

edited 4th July 2012

 

 

 

 

What the hell is going on with our economy in Europe since whatever that is, it underpins our level of activity; our level of social engagement our socio political locus does it not?

 

One cannot avoid, when living in BXL now and again picking up a history book about Schuman[1] or Delors[2] and the various grand plans which developed to drag "the EU" from the Coal and Steel union huddles in Irish bars, cigar smoke and beef prices; to this monster of power which we have today.

I have been extremely critical of the performance of the EU in the financial crisis here on this website. The crisis facing special units of the EU megalith made some howling mistakes in crisis management.

 

this link probably will not stick ECFIN changes its website so frequently

 

It has become obvious recently that senior EU personnel really do not understand how banking and financial markets function. (reference) The disaster that was the EBA (& its predecessor CEBS) speaks to that clearly!

EBA Stress Test 2011 - Details of the 90 Banks - Tables (Bank-by-Bank)

This is a summary of the 985 pages long detailed report. (Tables may take a while to load)

EBA Stress Tests Results - official results - 8 banks fail stress test

 

Results of the 2011 EU-wide stress test

 To see bank-by-bank data go here!

2011 EU-WIDE STRESS TESTING EXERCISE - EBA website - F5, F5, F5, F5...

So, how many of you are glued to this website pressing F5?! (& why ?)

EBA

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