We're the ones who will pay if stress tests are ultimately wrong
Published 26/03/2011 | 05:00
IN a statement he may come to regret, former European parliament president Pat Cox yesterday grandly descri- bed stress tests on Irish banks as "the most important judgment call on numbers that has ever been made in the history of the State".
That kind of grandiose claim is part of a curious assumption in Europe that the results will end all debate and conjecture about the health of Ireland's banking system. They won't.
As we have seen from previous stress tests on the Irish banks, modelling for loan losses in financial institutions is a notoriously inexact science. Virtually no regulator who carries out such exercises ever gets them exactly right.