EBA: Details on 2014 EU-wide stress test Post author By Philip Lane Post date January 31, 2014 here. Categories In Uncategorized 18 Comments on EBA: Details on 2014 EU-wide stress test ← Mody: The ECB is much too stodgy – the euro fuelled a leveraged bet that went bad → Economics and Finance Teaching Before and After the Crisis 18 replies on “EBA: Details on 2014 EU-wide stress test” This item that appeared in Suddeutsche Zeitung is of interest. (It cannot be linked to directly, apparently because of the inclusion of a Heath-Robinsonian illustration concocted by the Greens to illustrate the seemingly absurdly complicated procedures for bank resolution insisted upon by Schaeuble). 31. Januar 2014 00:02 Pläne zur Bankenunion SPD verbündet sich mit EU-Parlament gegen Schäuble The Davos World Economic Forum 2014Bild vergrößern Schäuble beim Weltwirtschaftsforum in Davos: Der Finanzminister erntet Kritik für seine Vorschläge. (Foto: Bloomberg) Schäubles Vorschläge zur Bankenunion treffen auf scharfe Kritik. Gemeinsam mit dem Europäischen Parlament will die SPD dagegen vorgehen – und damit auch die europapolitische Dominanz des Finanzministers brechen. Von Guido Bohsem, Berlin Die SPD will zusammen mit dem Europäischen Parlament gegen die Pläne Wolfgang Schäubles (CDU) zur Bankenunion vorgehen. In einem Brief sichert der SPD-Fraktionsvize Carsten Schneider den zuständigen Berichterstattern des Parlaments seine Unterstützung zu. Zugleich betont er in dem der Süddeutschen Zeitung vorliegenden Schreiben, welche von Schäuble durchgesetzten Punkte die SPD-Fraktion besonders kritisch sieht. Das Schreiben ist Teil einer gezielten Strategie der SPD, die europapolitische Dominanz des Finanzministers in der Euro-Krisenpolitik zu durchbrechen. Auch Außenminister Frank-Walter Steinmeier und SPD-Chef Sigmar Gabriel haben bereits angekündigt, sich der Europapolitik verstärkt anzunehmen. Dies geschieht offenbar auch, um den Verzicht der SPD auf das Finanzministerium auszugleichen. Schneider kritisiert insbesondere den Mechanismus zur Abwicklung von angeschlagenen Banken, auf den sich die europäischen Finanzminister kurz vor Weihnachten verständigt hatten. Dass die SPD Schäubles Position infrage stellt, liegt zum einen an den bevorstehenden Europawahlen. Ihr Vorgehen ist aber auch damit zu erklären, dass Schäuble als Vertreter der schwarz-gelben Regierung verhandelt hatte, die bis kurz vor dem Abschluss geschäftsführend im Amt war. Zuletzt springt der Abwicklungsfonds ein Vereinbart wurde, dass die angeschlagenen Institute zunächst selbst versuchen müssen, an Kapital zu kommen. Gelingt das nicht, müssen die Anteilseigner Geld nachschießen. Anschließend werden die Gläubiger herangezogen und dann auch die Bankkunden. Sollte das noch nicht reichen, springt der Abwicklungsfonds ein. Bankenrettungsplan der EU Bankenrettung in der EU – Das verrückte Labyrinth Auf dieses Konto sollen die europäischen Banken über eine spezielle Abgabe in den nächsten zehn Jahren 55 Milliarden einzahlen. Die Beträge werden zunächst in nationale Kammern eingezahlt. Geht also in der Aufbauphase eine irische Bank pleite, wird zunächst auf die irische Kammer zurückgegriffen. Sollte dann noch Bedarf bestehen, springen die Staaten ein. Schneider kritisiert in seinem Schreiben insbesondere die zehnjährige Aufbauzeit für den Abwicklungsfonds als viel zu lang. “Auch die Zielgröße des Fonds von gegenwärtig etwa 55 Milliarden Euro erscheint uns als zu niedrig bemessen.” Zudem solle geprüft werden, ob man dem Fonds nicht erlauben solle, selbst Geld auf dem Kapitalmarkt aufzunehmen. Eine einheitliche Abgabe abhängig vom Risikoprofil der Bank Damit dies möglich sei, müsse die Bankenabgabe bereits in der Verordnung selbst verpflichtend geregelt sein. Vor allem müsse sichergestellt werden, dass “die Abgabe abhängig vom Risikoprofil der Bank in allen Mitgliedsstaaten einheitlich erhoben und im Vollzug auch durchgesetzt wird”, schreibt Schneider. Unbedingt verhindert werden müsse, dass die Banken die Abgabe von der Steuer absetzen könnten – “sonst würden die Mitgliedsstaaten über Steuermindereinnahmen die Bankenabgabe zahlen”. Schließlich plädiert Schneider dafür, das Entscheidungsverfahren im Krisenfall schlank und effizient zu organisieren. Die bislang angestrebten Regelungen “sind kompliziert und in der Praxis schwer umzusetzen”. Das Europäische Parlament hatte den Kompromiss abgelehnt und Änderungen verlangt. Um das Vorhaben noch vor den Wahlen im Mai über die Bühne zu bringen, muss bis Anfang März eine Einigung zwischen den europäischen Volksvertretern und den nationalen Regierungen gefunden werden. The negotiation that matters appears to be taking place within the new governing coalition in Germany. The SPD, it would appear, is intent on bringing some additional flexibility to the Schaeuble Plan for banking union. http://www.reuters.com/article/2014/01/31/germany-banking-union-spd-idUSL5N0L51OK20140131 FYI http://www.ft.com/intl/cms/s/0/dba5d088-8a6f-11e3-9c29-00144feab7de.html#axzz2rydTumOf Big tail risk here . Could be a massive clusterf### Acceptable models Clearly stated and assumed assumptions Clear on idealisations and simplifications Legal situation clearly explained Transparent on which effects are neglected All relevant risk factors taken into account The model relies not purely on historical data but aims to model the future risks using theory, scenarios, expert opinion The model is tested The model is regularly challenged and compared against industry best practice Unacceptable models Back of fag packet Everyone else is doing it Anything from AIB Theory is misapplied Pure stats, no explanation “that’s the why” Just because it suits the market at a point in time Excel operational risk Hidden and unclear assumptions Too many simplifications The model is not tested against the real world Inappropriate or stale parameters Permagrowth The model is not sufficiently understood within the company/the ECB/the Troika Any input from Dieselboom The Hank Greenberg problem- only one person understand how the whole thing works is The memes are banjaxed It has a DoF signoff what is wrong this time ? D O C M, since you bring up the same Carsten Schneider link at least 4 times today on this blog, don’t you think you are overdoing this a little bit?. You took sides with the Syria war propagators, who could not even get a majority in their own parliament, and now please search this blog for the Carsten Schneider, you are promoting, that is the bank clerk, who wanted to write Irish corporate tax rates into the coalition treaty, halluzinating about becoming German finance minister, and is singing his swan song since Asmussen is groomed for that job : – ) all Beyond that, I take the October 2014 deadline and the 5.5% CET1 as the 2 relevant numbers from the posting. Do I miss something? The three EBA documents are mostly empty fodder. No real “detail” just a few vague statements about objectives of the exercise and the hoped-for outcomes. @DOCM,diagram here. http://www.eurointelligence.com/news-details/article/spd-opposes-deal-on-banking-union.html?no_cache=1 @ jG Thanks for that! The site appears to be behaving somewhat erratically (not a first with WordPress), hence my repetitive postings. Test John, given that the ECB balance sheet shrunk by 450 b in the last year, and that the 1 month LIBOR in EUR is higher than in USD, that would not constitute heresy : – ) Posts going missing ok. Definitely EBA! I linked to this to show the ‘excellence’ of the EBA is drawing up a meaningful Excel spreadsheet. https://www.eba.europa.eu/supervisory-convergence/supervisory-disclosure/aggregate-statistical-data ‘Data on National Banking Sectors’ 2012. “To this end, the EBA will provide competent authorities (CAs) with a consistent and comparable methodology, which will allow them to undertake a rigorous assessment of banks’ resilience under stress.” Does that excel spreadsheet presage a, ‘consistent and comparable methodology’. @ Joseph Ryan et al The EBA and AQR are not central to the debate at this point in time. The conclusion of an agreement on the banking union is. The omens are good! As Samuel Johnson remarked, nothing concentrates the mind like the threat of immediate hanging, in this instance a resurgence of the euro crisis in the lead-in to the European elections in which eurosceptic candidates may get up to 30% of the vote. . http://www.rp-online.de/wirtschaft/bankenaufsicht-legt-regeln-fuer-neuen-stresstest-fest-aid-1.4004379 If Germany’s replacement for Asmussen is now also arguing for a shortening of the ten year funding schedule, something must be stirring. There is also a story in Der Spiegel that a third – relatively modest – rescue package for Greece is in the works before the elections! @ Joseph Ryan et al As posts have been bouncing around or not appearing at all, it may be useful to repeat some elements. It looks as if the German constitutional court will refrain, if the view of di Fabio, a former senior member, is any guide, from pulling the house down in relation to OMT. http://euobserver.com/institutional/122920 The court may have had some regard to opinion such as this (by the head of Bruegel). http://www.brookings.edu/~/media/Research/Files/Reports/2013/08/g20%20central%20banks%20monetary%20policy/TT20%20european%20union_wolff.pdf The Bundesverfassungsgericht, with the Bundesbank, are the two fixed stars in the German political firmament, both having problems in coming to terms with Germany’s membership of a monetary union. It is difficult, for example, to see how di Fabio, a retired judge of the court, can justify the statements below given that the legal services of all three institutions involved (Commission, Parliament and Council) have said that there is an adequate legal basis. It seems unlikely, also in the light of his most recent comments, that the court, even on this occasion when it would be the obvious thing to do, will bend the knee and refer the issue to the ECJ. Instead, further restrictions will, in all likelihood, be placed on the scope for action by the German government. “EU treaties don’t foresee a common bank supervisor and even less for the ECB to be it,” he said. The former judge said the treaty needed to be added to in light of the ECB new future role of supervising the eurozone’s largest banks.” @DOCM Despite reading the press release, I am still confused as to who is doing the stress tests. The EBA press release gives the impression that it is that body that is providing the data. I was under the impression that the ECB is the body primarily responsible, that the ECB in turn would delegate some of its work and responsibility to the various national CBs. I also understood that a private consulting group, Oliver Wyman, had been delegated some work on the stress tests. I don’t understand where and whose behest the EBA fits into all this or indeed the primary role of the EBA itself, and whose interests that body serves. [With regard to the issues under decision in the German constitutional court, it seems logical that if an EU institution is acting outside its remit, then the matter should be referred to the ECJ, as you have noted above.] With reference to the stress test themselves, no matter how diligently and honestly they are carried out, they are merely opinions at a point in time, based on the underlying assumptions at that time. Three months later as events and outlooks change, more especially change for the worse, then the stress tests completed will be made redundant. Ultimately, banks can only be as healthy or as anemic as the economy in which they conduct the majority of their business. Consequently, as banks have increasingly re-nationalised since 2008, the health or otherwise of the banks, is tied more and more to the health or otherwise of each individual the economy. Imho therefore, the whole stress test dog and pony show will achieve very little that can not be deduced form the existing economic statistics for each country. @ Joseph Ryan I suppose that the main explanation for the divided responsibilities that you mention is that the ECB is concerned, by definition, with the euro area countries while the mandate of the EBA is in respect of all 28 member countries of the EU, the biggest beast among the non-euro countries being, of course, the UK. It seems to me that the core question is a political one i.e. the market’s assessment of the willingness of the euro countries to “do what it takes” across the entire gamut of measures required cf. the explanation given for the success of the – still virtual – OMT in the Brookings paper. There are clear indications from the material linked to above that the search for a compromise is on. Neither the constitutional court nor the Bundesbank will IMHO make any worthwhile contribution (other than not getting in the way). “It seems to me that the core question is a political one i.e. the market’s assessment of the willingness of the euro countries to “do what it takes”” I think you greatly overestimate the markets, DOCM. I recall reading a lot about “bond vigilantes” in 2010 but once the spigots were opened they disappeared. And what the market wants is not the sum of politics. It always comes back to the ordinary people in the end. Very interesting reaction in the UK to the latest flooding. Climate change will probably bring down the plutocrats. Innit. seafoid, I am interested in “Very interesting reaction in the UK to the latest flooding” care to share a few links?, you find important (does NOT mean that you have to agree with them : – ) @ Francis It’s a mix of English humour and climate change insight http://www.theguardian.com/environment/2014/feb/03/flooding-threat-severn-thames-riverside-properties#start-of-comments • hodgeey 0February 2014 7:23pm Flooding of the countryside is deliberate policy. http://eureferendum.com/Default.aspx o MrCake hodgeey 03 February 2014 7:33pm The wettest January on record was deliberate policy? Youtheman hodgeey 03 February 2014 7:35pm I thought it was all down to gay badgers? octopus8 hodgeey 03 February 2014 7:38pm Tin hats! For sale. £2.50 each, three for £8.00. o LochnessMunster effisdad 03 February 2014 8:48pm Huge swathes of the UK are vulnerable to flooding as the sea rises and extreme weather events increase. Why didn’t anyone tell us. • teacuprider 03 February 2014 8:52pm I think the government are somewhat panicking about these floods now, after having ignored the issue for weeks. The fact is nobody has a solution because ther isn’t one, at least in the short term.The test will be what their attitude will be once the urgency has gone out of the situation. And will it change minds about climate change, no, specially if it involves spending money on anything but pet government projects. We will see . • guardianman 03 February 2014 9:00pm Back in the1980’s farmers were encouraged, if not paid, to remove hedges etc. to create larger fields. Now farmers on upland pasture collect a subsidy not to plant hedges and trees on their land. Hedges and trees are big sponges in effect holding back rain water and slowly release it over time. I have worked for Somerset County Council for 34 years and have seen what the removal of hedges etc. have done to roadside drainage. The drains and grips are silted up from soil washed from the fields. The rain that falls on the hills around the levels has very little to hold it back and when the ground is saturated it reaches the flood plain much quicker • rockyrex 03 February 2014 10:04pm This whole sequence of storms since the Saint Jude’s Day Storm at the end of October is very unusual. Currently they are arriving roughly every 2 to 3 days, with no sign that this will change soon. Weather systems under-950 hPa are rare but there have been several since Mid-December. The Met Office say: ” On Christmas Eve a mean-sea-level pressure of 936 hPa was recorded at Stornoway (Western Isles), the lowest such value at a UK land station for many years.” (The Met Office website says pressures below 950 hPa are rare – Pressures below 950 hPa have been recorded at UK weather stations about 30 times in the last 200 years: http://onlinelibrary.wiley.com/doi/10.1002/wea.20/abstract – this reference (a paper published in 2007) was sent to me by the Met Office in reply to an e-mail I sent them asking about these very low pressures that are appearing recently) The Met Office website also says for December 2013: “The UK overall received 154% of average rainfall. Two broad areas, one over southern and south-east England and the other extending from the Lake District to Highland Scotland, were much wetter than average with many places receiving twice the normal rainfall for the month” Some commentators have suggested that there is no evidence of this kind of autumn/winter weather in the UK in any records, even using informal written material from the times before formal meteorology. Of course, someone will tell us that it is all normal, but some evidence for a previous period like this would be useful. The storm arriving on Wednesday 5/2/2014 is shown on the Met Office website pressure map with a central pressure below 948 hPa. Here we go again. o TheDogShouterer WrekinAir 03 February 2014 10:34pm Where d’you think Owen will go next. Somerset Levels or Berkshire Thames? “So, Owen Paterson, what was it that first attracted you to the millionaire waterfront properties of Old Windsor?”. • LEDLAMP 03 February 2014 10:32pm Just saw on the news that the Tories have ousted Tim Yeo, one of only a handful of them that understands the terrible and increasing risk of climate change.Seems that they are becoming more extreme and delusional and moving inexorably to a British ‘Tea Party’ controlled by corporate interests. VSLVSL LEDLAMP 03 February 2014 10:58pm Recommend 5 A similar thought crossed my mind. He also voted in favour of gay marriage and this may also have been a factor in his deselection. The Conservative party has not managed to get a parliamentary majority in 20+ years, and now feels threatened by UKIP, if they’re driven further to the extremes teabaggism looks a real possibility. Whilst this might work to secure Gove a majority support (his brand of demagoguery is always popular at conference time) the shrinking rump he’ll command will be a pyrrhic victory. Comments are closed.