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Why bank stress tests are so vital for Europe 

July 27, 2016

Nicholas Hastings, News Markets

In a few days the European Banking Authority and the European Central Bank will publish the results of their so-called stress tests on the European banking system.

These results will not only be key to boosting confidence in European banks, which have been sorely knocked by the global financial crisis as well as by the eurozone debt crisis in recent years, but they will be vital for securing the future of the European economic recovery.

Without healthy banks, credit will be constrained and growth curtailed in an area that is already struggling to defeat deflation and avoid any further economic contraction.

So what are stress tests and how do they work?

They first came to prominence after the financial crash in 2008 when so many banks had to be bailed out by government, or public, money and it became apparent that banks weren’t conducting their own rigorous balance sheet analysis. Read more

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