11 Dec 2010

More stress tests ahead for EU banks

9:54 am on 11 December 2010

The Committee of European Banking Supervisors is preparing a new and much more rigorous round of stress tests for banks in Europe.

Banks in the Irish Republic have nearly collapsed despite passing a previous round of stress tests held over the summer.

The BBC reports the new tests will be used to determine how much additional capital banks must take on to absorb potential losses on their investments.

Several international figures, including former UK Prime Minister Gordon Brown, have called on European leaders to massively recapitalise their banks in order to avoid the risk that the European sovereign debt crisis could trigger a banking collapse.

The original stress tests were heavily criticised for failing to consider the possibility that a European government may default on its debts.