EBA Needs More Legal Powers for Stress Tests, Enria Says

By Jim Brunsden
September 19, 2012 11:35 AM EDT

The European Banking Authority needs more legal powers for stress tests to ensure that bank data are correct, Andrea Enria, chairman of the EBA, told lawmakers during a European Parliament hearing in Brussels.

Enria said the agency suffered “some negative impact” when Dexia SA (DEXB) and Bankia group passed stress tests only to subsequently need additional capital.

“Going forward we need to make sure that if we are given the responsibility to conduct stress tests, we are given also the legal tools to make sure indeed that the results are actually reliable,” Enria said.

Eight banks failed the London-based EBA’s last round of stress tests in July 2011 with a combined capital shortfall of 2.5 billion euros ($3.2 billion), leading to criticisms from analysts that the exercise wasn’t sufficiently rigorous. Franco- Belgian lender Dexia passed, only to collapse two months later.

“We need to be in a position to go to the banks” and “make sure that the data the banks gives us is reliable,” he said. “Unfortunately this is not the case at the moment.”

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