The ink on the agreements that will hand supervision of the euro area's biggest banks to the European Central Bank (ecb) is barely dry. Yet the ecb is already enmeshed in squabbles with national banking supervisors over the extent of its powers and the rigour with which it will undertake its first big task, a warts-and-all review of the balance-sheets of the banks it will take charge of in a year's time. Details over how the ecb will conduct this asset-quality review (aqr) will probably be released in the second half of October, but the outlines are already beginning to emerge. The main aim of the review is to ensure that the ecb is not embarrassed by the revelation of holes in the balance-sheets of its new charges. Fresh in its mind is the example of the European Banking Authority (eba), a young European regulator that lost much of its credibility after the collapse of banks that had passed its stress tests only months earlier.
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