LONDON, July 10 (Reuters) - The type of balance sheet checks being faced by banks across Europe to draw a line under the financial crisis are not foolproof, Britain’s top banking supervisor said on Thursday.
Top euro zone banks are undergoing so-called asset quality reviews (AQR) where the European Central Bank sifts through their books to check for poor quality loans. The BoE itself has also conducted asset quality reviews on UK lenders.
“AQRs are designed to assess the more structural features of loan books as well as their performance, including whether forbearance is being applied by the lender,” BoE Deputy Governor Andrew Bailey said.
“The granularity with which AQRs are undertaken can vary with their purpose, but there is always a fairly high level of intensity in terms of the closeness of the inspection,”
The AQR in the euro zone is a precursor to a wider European Union stress test of leading banks in a bid to finally draw a line under a protracted financial and government debt crisis.
“In the best of all worlds, supervisory initiated AQRs should not reveal anything that isn’t already known. I will just say that experience shows that we are not there yet,” Bailey added. (Reporting by Huw Jones; Editing by Andrew heavens)