Regulator says too few European banks have been wound down

City A.M. Reporter
TOO FEW European banks have been wound down over the past few years, the chairman of the European Banking Authority (EBA), Andrea Enria, was quoted as saying in an interview published yesterday.

Enria told German daily Frankfurter Allgemeine Zeitung that governments tend to want to keep their lenders operational rather than let them fail, which has slowed the repair of the banking sector.

“I am convinced that too few banks in Europe have been wound down and disappeared from the market so far. It has been fewer than 40 institutes, in the United States by comparison there were about 500,” he said.

The EBA, Europe’s top banking regulator, is preparing tests on the finances of top lenders next year in conjunction with the European Central Bank, potentially paving the way for further multibillion-euro fundraising measures by banks deemed shaky. Enria said that it is sensible to set out the stress scenarios to be used in the tests shortly before the exercise begins.

“It would be good to time the announcement shortly after the EU Commission releases its spring forecasts,” Enria said, adding that the tests should be based on the most current macroeconomic projections possible.