Wall Street Journal
March 7, 2011
European Union regulators preparing a new round of bank stress tests are unlikely to examine what would happen to the region's banks if a euro-zone government defaults on its debt, a European official said Monday.
Most of the EU's national regulators at a meeting of the European Banking Authority last week in London opposed a plan to stress-test euro-zone government debt held on "banking books", where accounting rules allow banks to place debt that is supposed to be held until it matures, the official said.
The tests will only examine "trading books," where banks hold debt that they are planning to sell before it matures.
Testing held-to-maturity euro-zone government bonds might be seen as an implicit acknowledgment that some of the debt issued by euro-zone governments may not be repaid in full.
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