The European Central Bank decides to strengthen the supervision of the big banks in the euro zone. The ECB announces a new set of measures to further reduce the risk of a financial crisis.
The banking authorities let it be known that they remain vigilant, no one lowers their guard while the risk of slippage is always possible. Controls are already very extensive, more on the European side than on the American side. Bank regulation is much more restrictive in Europe than it is in the United States. It is therefore important to maintain the pressure.
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From September, the ECB will require banks in the euro zone to communicate to it every week, and no longer every month as is the case until now, all the information allowing it to verify the amount of available liquidity, i.e. the money each institution has in its coffers, bank deposits, committed loans, etc.
Mobilization in the heart of summer
Everyone keeps in mind the rout of some regional banks in the United States this winter: the fall of Silicon Valley Bank in March and the domino effect on other establishments. And then in Switzerland, shortly after, but with no direct link and on a completely different register, the resounding bankruptcy of the bank Crédit Suisse, entangled in financial scandals for years and for which it was time to whistle the end of the game. At the beginning of July, the American authorities decided to reinforce their own rules of control of the banks, Europe benefits from it to reinforce its own.
“Basel III”
Without detailing the very technical mechanisms, let us simply cite the so-called Basel III rules (Basel as the city where this regulation was born in 2010) which requires European banks to have more capital – money available in cash – than they have sums committed outside, such as loans granted to customers. The objective is to ensure that banking establishments have a safety cushion to hold up in the event of a hard blow and to resist in times of crisis such as in 2009.
So strengthening vigilance, in addition to the “stress tests” that the authorities regularly pass to banks, the equivalent of crash tests for cars. We subject the banks to different crisis scenarios and we look at whether they are able to withstand the explosion of public or corporate debt, for example. The last major “stress test” dates back to January 2021 and everything went well, despite the context of strong international tensions.