It can only deliver a credible indication of the resilience of European banks to the market if it is based on tough stress scenarios. This means that the scenarios will also have to include stressed sovereign bond markets. In addition to impartiality, transparency with respect to both the process and the results is key for the assessment to live up to expectations.
Of course, supervisors will continue reviewing credit-granting and risk-management policies at banks of all sizes, and I suspect that, in the years ahead, market-driven spin-offs from the new procedures at larger banks will be adopted by community banks. Apparently another fear exists.