Backstops are in place for the European Central Bank’s Comprehensive Assessment of euro-area lenders, allowing for a “very rigorous” balance-sheet review, ECB Vice President Vitor Constancio said.
The first backstop for banks found to have capital shortfalls is the markets, Constancio told reporters in Frankfurt today. “Investors have been investing again in banks’ capital, and stock prices have increased,” he said.
The second resource open to banks in need of “balance-sheet repair” is public money, “which is available,” Constancio said.
“There was a solemn declaration by the Eurogroup regarding the backstops: first national backstops, and of course there is also the ESM,” or European Stability Mechanism, the euro-area firewall fund, from which euro states can borrow to prop up their banks, “as was recently the case with Spain,” he said.
“The backstops are there, are enough, and so we will absolutely conduct an exercise that will be very demanding and very rigorous,” Constancio said.