However, a bank’s business model will also be accorded great significance in a dynamic stress test, which will follow the rather static balance sheet assessment. The main promise of euro area policy-makers is that taxpayers will no longer have to foot the bill for ailing banks. Some politicians say no more taxpayers’ money will flow at all.
That seems very optimistic to me, but I am not a politician. It will be our task to minimise the likelihood that banks run into difficulties in the first place. The policy-makers’ argument is that there should be no bail-out in future, but rather a bail-in. But these rules do not take effect until 2018. What will happen in the meantime?