One bad loan definition for stress tests sought

Banks across the EU will be asked to use a single definition for bad loans in the upcoming review of their loan books, a senior EU regulatory source told Reuters, making it harder for banks to conceal the state of their businesses behind local conventions.

The ECB hopes to begin work on an asset quality review of major banks in the 17 eurozone countries later this year. The review will take a detailed look at whether they’ve set aside enough cash to deal with debts unlikely to be repaid, so the ECB can stand over the state of the banks’ before it becomes their official supervisor in late 2014.

National supervisors elsewhere in the EU will conduct a similar review for the non-eurozone states.