European banks to escape stress tests in 2012

10 February 2012

Banks across Europe will not face stress tests in 2012 as they are already making progress on the task of enhancing their balance sheets.

That is according to the European Banking Authority (EBA), which has announced it will hold off on conducting such analysis this year on the grounds that financiers have begun their preparations for new capital rules in earnest.

The continent's leading financial regulator revealed that banks are planning to boost their balance sheets by around €98 billion ($130 billion) more than it originally demanded.

And this commitment - which will see companies increase their holdings by 26 per cent - has done enough to convince the EBA, a body established in November 2010, that stress tests will not be required in the coming 12 months.

Bob Penn of Allen & Overy told Bloomberg: "This says more about the headwinds that banks are expecting from the sovereign crisis."

By Asim Shah

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