ECB stress tests – UNI Europa Finance response
At its steering group meeting on 29th October, UNI Europa Finance welcomed the recent stress test carried out by the European Central Bank and the European Banking Authority, aiming to verify that European banks could not fail or require a taxpayer-funded bailout if the economy was to deteriorate quickly. All in all, 25 banks failed the test with 14 banks now having nine months to raise capital or they risk being shut down.
The results show that several banks have not rectified the issues raised in the last stress test of 2011, something which seriously concerns UNI Europa Finance. However, for those banks that failed the 2014 stress test, failure of the test should not be regarded as equivalent to failure of these banks themselves. Finance Watch regards the ECB’s comprehensive assessment as an extensive supervisory exercise with benefits for transparency and confidence in the banking sector and that some specific findings will help to improve banks’ internal procedures and risk management.
At the core of inclusive and long-term risk management you should find a bank’s employees. A stable banking sector is based on respected employees who have a sustainable working environment, safe jobs, and the time and means to provide customers with quality advice. Therefore, complementing the stress test we would have liked to see an evaluation of sales incentive schemes, since this has a clear effect on the stability of the sector. This evaluation should be done in cooperation with trade unions to ensure that social and business culture dimensions are properly taken into account. Bank employees participation needs to be part of the public debate and in the mind of supervisors.
A quick rectification of the situation is now required. It is important to ensure that employees do not pay the price for future failures, risking their jobs in the process. Therefore, initiatives taken to move towards a sustainable future for all banks should be achieved through social dialogue.
The goal needs to be a well-regulated and diverse banking sector, delivering good outcomes for employees and consumers alike, while providing quality banking services and funding for the real economy.