Draghi says ECB officials prepared to fail banks in next year's stress tests

FXstreet.com (London) -European Central Bank President Mario Draghi has said that officials were prepared to fail banks in next year’s stress tests.

In a TV interview following the publishing of the ECB’s bank asset test plans, Draghi said that “banks do need to fail”.

The assessments are scheduled to be completed in October 2014, when the ECB will publish its findings along with recommendation for supervisory measures.

The tests will be the third round of stress tests, with the previous two conducted by the European Banking Authority proving ineffective and failing to instil confidence.

“The test is credible because the ultimate purpose of it is to restore or strengthen private sector confidence in the soundness of the banks, in the quality of their balance sheets,” added Draghi.

Draghi has also pushed for a common resolution mechanism to deal with troubled Eurozone banks to be in place by 2015. The ECB has pushed Eurozone governments to agree to a single resolution mechanism (SRM), but discussions have ground to a halt over the issue of a common insurance deposit scheme.

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