With the results of its asset quality review (AQR), to be published on Sunday, October 26th, the European Central Bank intends to provide clarity on the soundness of the banks it will supervise in the eurozone. In addition, it may request a series of follow-up actions before assuming its new set of tasks under the Single Supervisory Mechanism (SSM) Regulation in November. On the same day, the European Banking Authority (EBA) will also be publishing the results of its stress test, covering 123 banks across 22 European Economic Area (EEA) countries. Although the comprehensive assessment will enhance disclosure, simultaneous publication of the results of an AQR by the ECB and a stress test by the EBA, on a different sample of banks and using different configurations of banking groups, may also create confusion about both the sample and the data published. This Commentary by Willem Pieter de Groen and Karel Lannoo demonstrates how and why.
Willem Pieter de Groen is Researcher and Karel Lannoo is the Chief Executive Officer and Senior Research Fellow at CEPS.