European Union's banking regulator recommended asset quality reviews on major EU banks, which will delay the next stress tests until 2014.
The European Banking Authority said in a statement that the "asset quality review" by the European Central Bank will "help dispel concerns over the deterioration of asset quality due to macroeconomic conditions in Europe." Appropriately reviewed balance sheets are a key input to an effective stress test.
The EBA, that is charged with harmonizing banking rules across the EU, will provide details of bank holdings in the second half of 2013. The EBA conducted last stress tests in 2011, but failed to recognize problems at the lenders.
The ECB will review asset quality of banks in the 17 nation bloc and the national banking regulators will conduct the procedure in remaining 10 EU member nations.
Andrea Enria, Chairperson of the European Banking Authority said, "Our recapitalization recommendations have brought the common equity capital ratios of EU banks in line with those of major international competitors." But concerns remain on asset quality and forbearance, Enria noted.
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