Draghi expects no disasters from bank health checks

Reuters

PARIS (Reuters) - European Central Bank President Mario Draghi said on Wednesday he expected no disasters to come to light in forthcoming financial health checks on the region's banks, which would be rigorous.

The ECB is scheduled to take over supervision of the banks in about a year, and a resolution mechanism to deal with problem lenders should follow in 2015.

Before that, the central bank of the 17-member euro zone is to conduct an asset quality review, followed by stress tests, to ensure that banks enter common supervision in good health.

Draghi said a backstop needed to be in place to handle potential fallout from the twin reviews, and added that details of the test procedure would be given later this month.

"The whole exercise of the asset quality review and the balance sheet assessment and the stress tests make sense only if they are credible," Draghi said.

"...I don't expect major disasters, but it's quite important that full light be shed and full transparency be there," he told a news conference after the ECB left interest rates unchanged.

Asked about the state of the Spanish banking sector, Draghi said that the country had made good progress in fixing its banks after it applied for aid from its European partners.

"Everything seems to suggest that Spain will approach this exercise well-equipped, but of course it is very difficult to guess what will happen with individual banks," he said.

(Reporting by Eva Taylor, writing by Sakari Suoninen; Editing by John Stonestreet)

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