Strong doubts over rigour of European stress tests to be unveiled this morning

THE European Banking Authority (EBA) will this morning reveal the details of a second round of stress tests that are meant to help restore confidence in Europe’s ailing banking system.

The tests will be the EBA’s first in-depth interaction with 88 of Europe’s banks, which have previously been subject only to the authority of the Committee of European Banking Supervisors (CEBS), a looser committee of pan-European regulators.

But there are already doubts about the EBA tests’ effectiveness given that both the Bank of Ireland and the UK’s Financial Services Authority have promised a tougher round of tests.

Reports have suggested that the tests will be a little tougher on the issue of sovereign debt, but will otherwise be easier than the tests last year that were failed by only seven banks, none of them Irish.

Ann Cairsn of Alvarez & Marsal said: “The regulators and the banks know who the weaker players are. The stress tests can confirm that, but they will have no teeth unless the follow up restructuring and consolidation of the financial landscape happens.”