Taxpayers could in some circumstances be liable for the capital shortfalls of banks that fail the tests. This policy brief explains in detail what those circumstances are.
The author of the brief, Senior Policy Analyst at Finance Watch Paulina Przewoska, said:
“The EU’s new rules for dealing with troubled banks will face their first real test in 2015 if banks with capital shortfalls cannot find a solution before then. Taxpayers may still be on the hook for bank losses – not just by default but through deliberate and necessary legislative safeguards. With many banks still highly interconnected and too-big-to-fail, it is clear that the EU’s banking sector does not yet have the right structure to ensure that the new resolution tools will protect taxpayers.”
The ECB is expected to publish the stress test results in the second half of October. To find out more about how the tests work, you are invited to attend a free 45 minute public webinar and Q&A on the ECB’s AQR and Stress Tests, hosted by Paulina Przewoska (previously Head of Unit at the Polish Financial Supervision Authority), on 24 October at 13.00pm CET.
