Much of the reason for the slow return in confidence lies in the parallel weakness of the fiscal situation – a weakness which also has its roots in the credit-driven property bubble which lulled the managers of the public finances into a false sense of security ending up with a tax and spending structure highly vulnerable to the downturn.
Each bank is different in terms of its balance sheet, business lines, and risk profile, so regulators must be vigilant that both regulations and supervisory practices are being applied consistently. One area where this need for consistency is clear is in the Board's stress testing framework.