Any other business: trouble spots in European banking

‘1914: Day by Day’, the Radio 4 series by the historian Margaret MacMillan, is a gripping reminder that significant global events often arrive not in a single eruption but in a series of lesser happenings that only afterwards form an obvious pattern. Let’s hope that’s not what we’re watching in the banking sector as anticipation builds towards the results, due in October, of the European Banking Authority’s current round of ‘stress testing’. Last month’s trouble spot — with a certain resonance for the current centenary — was Austria, whose government forced losses on bondholders in the troubled Hypo Alpe-Adria-Bank by overriding a guarantee from the province of Carinthia. A clutch of other Austrian banks, all heavily exposed to eastern Europe, had their debt downgraded by Moody’s; one of them, Erste Bank, revealed it expects to lose €1.6 billion this year. Austria’s central bank chief Ewald Nowotny made matters worse by warning that the stress tests might ‘lead to exaggerations’ if too strictly applied, adding unconvincingly, ‘I don’t see any wobbly candidates.