Impending bank assessment good for Europe, says Draghi
EU central banker promises bad banks will get flunked23 October, 20:15
News that the ECB will begin its assessment in November before taking over supervision of 130 eurozone banks sent European stock markets into a tailspin. ''It will be a step forward for Europe and for the future of the euro economy'', Draghi told Bloomberg TV in an interview.
''This uniform inspection of leading banks will make them more transparent. It will also improve private sector trust in the solidity of European banks and in the quality of their balance sheets''.
The ECB, he added, will not hesitate to ''flunk'' banks that won't pass the stress test in 2014.
''We must be able to flunk banks. And if they need to be they will, end of story'', Draghi said.
Impending centralized supervision has pushed banks around Europe to recapitalize substantially, the EU central banker explained. ''But right now they are decidedly changing gears''.
''I am sure public backstop mechanisms will be put in place before we begin our assessment'', he added. ''Explicit commitments have been made to this effect''.
However setting up these public funds ''doesn't necessarily mean they must be used, because private investment money will be used to recapitalize banks first'', Draghi explained.