Europe: Quality not quantity

Author: | Published: 29 May 2014

Corporate governance failings, rather than inadequate capital reserves, are shaping up to be banks' biggest vulnerability in future stress tests.

In the recent US round of tests, the Federal Reserve (Fed) objected to several banks' capital plans due to qualitative deficiencies in their governance frameworks, analyses and internal controls when performing stress testing.

This marks a seachange in regulatory approach; and European banks can learn important lessons from the US results.

The key takeaway...