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| "The success of the EBA will be key to enhancing the financial stability and soundness of financial institutions and ultimately to rebuilding the trust of citizens in the European financial system" |
On being confirmed last month as the first executive director of the European Banking Authority, Adam Farkas, former head of the Hungarian financial supervisory authority, declared: “The success of the EBA will be key to enhancing the financial stability and soundness of financial institutions and ultimately to rebuilding the trust of citizens in the European financial system.” Farkas must know that the authority, founded in January this year, has not got off to an auspicious start. Last month, the EBA, the collective of European national bank regulatory bodies, began its latest stress test of banks accounting for 65% of total assets in the EU banking system. Results will be published in June and will gauge banks’ ability to withstand hypothetical stress events including, at worst, an economic contraction of 0.4% of GDP in 2010 and zero growth in 2011 across the EU accompanied by rising unemployment, higher interest rates on government bonds, a sovereign debt shock, a 15% stock market sell-off, rising overnight and three-month money market funding rates and falling house prices.
