Following the European Union’s demand, the European Central Bank (ECB) too has now called for more stress tests for European financial institutions. With ECB joining the fray, the call for stress tests seems to be enjoying the support of all major financial regulators across Europe.
Critics of the stress tests, however, believe that if the results of such tests are publicized, it may increase discrimination between strong and weaker banks. This, in turn, may affect the investment decisions of investors. Also, chances are rife that banks which fare poorly in these tests may have to deal with the leech-like attitude of lenders, who might increase their lending rates for such banks. Hence, upholding the privacy of the results of these stress tests is being seen as an important consideration in the success of these tests.
In the past, the Bank of England and the UK government had both decided against the publication of such stress tests in the UK.
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