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Mersch reiterates asset-quality needed review for ECB

FXstreet.com (Barcelona) - Earlier today, European Central Bank Executive Board member Yves Mersch said an asset-quality review and a stress test for European banks should be carried out by mid-2014, likely ahead of the central bank takes up supervision duties.

The Single Supervisory Mechanism at the ECB “could undertake the asset-quality review in the third quarter of this year until the first quarter of next year,” Mersch noted in a speech in London today, adding that a stress test would be conducted in coordination with the European Banking Authority. “Such a comprehensive assessment is needed before the SSM becomes operational,” he added.

Indeed, European leaders decided in June last year to lend powers to oversee European banks to the Frankfurt-based ECB, as part of a so-called banking union with the aim of breaking the link between governments’ creditworthiness and commercial lenders. The ECB is scheduled to begin supervision by the middle of 2014.

The ECB supervision “should create a level playing field for the European banking industry and remove any national biases or supervisory forbearance, and prevent the hiding of bad assets – or even leniency – towards so-called ’national champions,’” Mersch said.

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