ECB Will Test Banks With EBA Before Taking Over, Nowotny Says

The European Central Bank and the European Banking Authority will hold a joint financial stress test next year before the central bank takes over supervision, Governing Council member Ewald Nowotny said.

“It is planned that there will be a coordinated stress test before the European supervision starts,” Nowotny told reporters in Vienna today. “It will be coordinated between the ECB and the EBA, probably in the second half of next year.”

Bolstering confidence in the region’s financial industry is a key component of government efforts to defeat the debt crisis that has roiled markets since late 2009. Next year’s joint round of stress tests will gauge banks’ progress toward meeting new capital rules set by the Basel Committee on Banking Supervision before the ECB is set to take over supervision in March 2014.

The decision to hold a joint assessment was made to avoid subjecting lenders to separate tests, Nowotny said after a presentation of the Austrian central bank’s semi-annual financial-stability report. Details of the stress tests are still being determined, he said.

To contact the reporter on this story: Boris Groendahl in Vienna at bgroendahl@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

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