Attention however the stress test must be well done

CSF and EBRD, same fight While the Council of financial stability (CSF), met this weekend in Basel, has estimated that the global financial system showed signs of recovering without be still out of matter, the Chief Economist of the European Bank for reconstruction and development (EBRD), Erik Berglof, stresses also, in an interview with the "Echos", on the need not to declare victory too soon. "We will have other surprises", considers same Erik Berglof, who clearly wishes to put things clear after seeing his remarks distorted in the press: no, the worst is not necessarily to come. But he is expected to continue to navigate in troubled waters and not to exclude bad surprises from the banks in the countries of Central Europe and Eastern. Which are Western banks, which is therefore a risk significant for the European economy.

Of course, he insists on the great diversity of cases in the region: no common point between the Poland, which is beyond the recession, and the Baltic countries or the Hungary, severe. But the European banking system as a whole "is characterized by too much uncertainty. And without certainty, not confidence, therefore not return to growth. Unlike the United States or the Sweden, who published the result of "stress tests" (to have a clear idea about the vulnerability of each financial institution), most of European countries not yet did this exercise, what regrets the Economist. But there are emergency, j. Erik Berglof. Because the crisis has revealed, obviously, the "very low level of supervision and regulation of the banking sector at European level".

Attention, however: the "stress test" must be well done. Principal pitfall to be avoided, retreating to a national logic. "In view of imbrication of Western banks in different countries of the East, this would no sense to engage in simulations of country vulnerability."

National responses

Another error to avoid is to publish the results of these tests of vulnerability "without having a clear strategy, beforehand, developed to the point to solve the problems". Which implies, this time, national responses, because "whether one likes it or not, it is still on a national basis that runs the European Union". Finally, it would be good that Brussels Competition Directorate does focus not excessively on its dogmas. In other words, this is not because a Bank has been supported by a Government to be uncompromising on its practices in a country where it has subsidiaries. Because, "in matters of banking system, some links are threatening to collapse, when the entire system is at risk". In certain exceptional circumstances, solidarity must prevail over the logic of healthy competition. The Economist of the EBRD welcomes however the response so far. The international monetary fund mobilized quickly, and funds were raised, which crédibilisé its support of the countries of the region. Even positive finding for the European Union, which has multiplied by four potential support for the region.

Most outstanding, banks, businesses, States, are reached so far, to coordinate their actions. Instead of opting for everyone for itself, they have implemented a minimum of mutual assistance. "Even if it is not easy to explain to taxpayers of a country that their money will be used, for example, to save the banks in Ukraine, it is important to remember that doing nothing would have been much worse." If a real European recovery plan, the European institutions have, so far, to shake the elbows to save its system. It is "the main difference with the Asian crisis of 1998: the domino effect was avoided through better coordination.