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Derek Bishop

Director

Passing the stress test

Date added: 27th Oct 2014
Category: Culture of conduct/ethics

With competition from new entrants into the financial marketplace the stress test is only one measure of a bank's future success

“no adverse impact on the day-to-day operations of any of the banks and no impact on consumers.”

The comments from the Deputy Governor of the Central Bank of Ireland echoed many comments from analysts about the follow-on effects of the stress tests which have recently been completed in respect of EU banks.  His comment was made alongside an announcement of support to be provided in respect of the one Irish bank which had failed the test.

The EBA and ECB assessments of Europe’s banks seem to have been widely welcomed.  Although 24 banks failed the EBA test (none of them from the UK), there seem to have been few surprises with the overwhelming message being that banks are generally in a better place than they were in 2011 and that work was already underway to further strengthen those which had not passed this time.

But whilst the stress tests are of undoubted importance, they are only one measure of their future ability to support growth and ride out a financial storm.  As we have reported elsewhere, banks are also facing competition from new entrants into the financial marketplace.  In the long term the way in which banks are able to reposition themselves to provide products and services which put their customers at the heart of the process may have far more impact on their survival than the way in which their balance sheet is structured.

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