This exercise involves collating data provided by 6,000 auditors and central bankers from across the continent.
Problem loans buried since the financial crisis of 7 years ago are at long last being excavated.
Results of the analysis are expected to be announced in October but at this stage some estimates suggest that 30% of Europe’s banks could fail their “stress test” and be forced to scramble for support capital
Last week the market had a taste of the potential fall-out when Portugal’s Banco Espirito Santo suspended trading in its shares’ following concerns about accounting irregularities in its parent company. This news sent shares in London, Paris and Frankfurt lower.
Elsewhere the spectre of defaults by countries such as Hungary and Romania still plague the market.
The ongoing stress test comes as a timely reminder that all businesses operating in today’s climate need to have constant and rigorous focus to their commercial exposure.
Against the current competitive background it is very difficult to contemplate turning away business especially from a customer of long standing. Many times however, the best business is that which is left to competitors.
It may well be that turnover suffers when stricter controls are in place over such elements as payment terms and credit limits.
The reward for such fiscal discipline is obvious.
Avoiding defaults by customers still remains the surest way to protect the company’s bottom line.
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