Wall Street Journal
March 9, 2011
European officials are poised to let regulators in individual countries use their own definitions of a key gauge of banks' health in coming "stress tests," threatening to undermine efforts to buttress faith in the Continent's ailing financial system.
The new European Banking Authority, which is running the tests on 88 of Europe's biggest banks, has told regulators and bankers that the exams are likely to rely on each country's definition of an important capital ratio known as Tier 1, according to people familiar with the matter.
If the plan goes through, some skeptical bankers and regulators worry, it could undermine the effort to end the European financial crisis. They fear a rerun of one of the key weaknesses in last year's stress tests by the European Union. Those results were widely panned for giving passing grades to almost all banks, including some that subsequently required taxpayer bailouts.
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