Too many European banks surviving says chief regulator

Too many European banks have survived over the past few years and more should have been wound down, according to a top European banking regulator.

The chairman of the European Banking Authority (EBA), Andrea Enria, in an interview on Monday with Allgemeine Zeitung, said:

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.

The EBA has been responsible for stress tests across the European banking sector but has been criticised for having relaxed standards, with regards to the soundness of the European banking sector. New tests are being prepared for next year. Enria told the German newspaper that the stress scenarios will released before the tests begin.

It would be good to time the announcement shortly after the EU Commission releases its spring forecasts.

As to the methodology, we want to make that clear earlier. We are already very far advanced.

Enria also drew attention to the fact that the treatment of losses in sovereign bonds is a serious problem for European financial institutions, as they are considered risk-free under current banking regulations.