Euro area: Lack of a common backstop poses a risk on restoring confidence in the banking sector
Global & Regional Focus Notes
03 April 2014
• The lack of a common backstop to cover capital shortfalls identified by the ECB’s comprehensive assessment of banks does not break the doom loop between banks and sovereigns, with negative consequences on fragile public finances. • This raises concerns about the rigorousness of the ECB’s comprehensive assessment of banks and its effectiveness to restore market confidence in the euro area banking sector, reduce financial fragmentation and increase the ability of banks to finance the real economy.