ECB head Draghi: More progress needed to fix banks

LONDON — The European Union must be bold in putting its banks on a stabler footing, starting with a tougher health check for lenders this year, the International Monetary Fund said. The Washington-based watchdog said in its first ever formal study of the EU financial sector as a whole that the bloc had made significant progress but more was needed because financial stability remains fragile.

Update, and sure enough: PANICOS DEMETRIADES SAYS CYPRUS CENTRAL BANK INDEPENDENCE UNDER ATTACK. As a reminder, Panicos hold the now obsolete position of head of the Cyprus Central Bank. * * *

While little has been said in the mainstream western press about the ongoing fiasco surrounding Siena's Banca Monte dei Pasci, Italy's third largest bank and the world's oldest which may get its third bailout in three years, for fears that it may break the thin veneer of "recovery" in the European financial system, the situation on the ground in Italy is getting more serious by the minute and could have implications on both next month's general election, reaching as high up as the ECB's head Mario Draghi.

One half of the reason why the "market" has finally been reacquainted with gravity is its realization that the previously reported Spanish kickback scandal, which incidentally has been known for over two weeks to most if not the algos that push stocks higher, is refusing to go away.

When Mario Draghi (now ECB President), had oversight of the Italian bank system as Bank of Italy Governor, the Italian bank Monte dei Paschi di Siena (Italy's third largest bank) hid information on the derivatives transactions between 2006 and 2009. This information is just now out, and shares of the bank have plunged 22% in a few days. Mario Draghi ought to be under fire, but he says it's a "Matter for the Italian Authorities". The Mish translation is "It's a Matter for the Italian Authorities, to Sweep Under the Rug".

The by-now infamous Dutch FinMin Jeroen Dijsselblom - and head of the Eurogroup of finance chiefs - made some fascinating comments this morning with Reuters and the FT that are changing the shape of European markets rapidly. From banks need to save themselves to forcing "all financial institutions, as well as investors, to think about the risks they are taking on because they will now have to realize that it may also hurt them," he is making a lot of sense - though we suspect Mr. Draghi will not be amused as his 'promise' looks like being tested.