Default a factor in bank test
EUROPE’S banking regulator said that it has updated its stress test protocol for the region’s banks to factor in a possible Greek default.
The European Banking Authority (EBA) has until now refused to include the possibility of a sovereign default in its tests.
The EBA said yesterday it was closely monitoring the perilous financial situation in Greece and that its stress test of 91 banks will allow an assessment of current market conditions on sovereign risk and banks’ cost of funding.
Haircuts to be applied to trading book assets have been adjusted in some cases to reflect losses related to current market values, the EBA said in a statement.
Results of the latest round of stress tests are expected to be revealed on 13 July, following the first tranche of tests last year, which fell short of predicting how Europe’s banks would fare under pressure.