Everyone is familiar with such terms as “banking supervision,” “rescue funds,” “Lehman Brothers,” “financial crisis” and “government bailout.”
The last major financial crisis, which reached its pinnacle in 2008 when Lehman Brothers (the fourth largest U.S. investment bank at that time) failed and some 30,000 employees were laid off, is still fresh in our minds. The Lehman Brothers bankruptcy unleashed a massive wave of turbulence on the global financial markets. In Europe, entire countries such as Greece and Cyprus were more or less bankrupt. Others applied for aid under the Euro rescue package.
By this time at the latest, people began to demand supervision and regulation of the banks (true to the saying “Trust is good, control is better”), which had played a large role in the financial crisis with their risky management tactics.
Finally, in the fall of 2011, the 27 member states of the EU agreed on the SSM (single supervisory mechanism) to control these states’ banks. Ultimately, only a regulated, rigorous financial system, guided by government provisions and supervision, can prevent massive financial crises of this kind.
The agreement clarified such questions as:
– Which banks must be audited, and to what extent?
– What kinds of legal requirements do we need in these countries?
– Who is in charge of the controls?
The bank’s influence on the country’s economy must be taken into account. Under the SSM, banks with a balance sheet in excess of €30 billion or that account for more than 20% of the country’s economy are subject to controls, as are banks that have applied for aid under the EFSF or the ESM. These controls are always applied to the three largest banks in the member countries. This criterion applies to 128 banks in the euro zone this year. Twenty-four banks in Germany alone are affected.
The “comprehensive assessment” consists of three elements: risk review, balance sheet review, and a stress test. The comprehensive assessment, which is to be harmonized internationally, essentially aims to ensure comparability.
In addition to 120 companies listed on the stock exchange, EVS Translations works with CPA firms and about 50% of banks located in Germany that meet the criteria for this assessment. Banks in Austria, Switzerland, Bulgaria and the U.S. have also come to rely on our quality.
