In Europe, ‘stress test’ no sweat for most banks

Austin American-Statesman - - BUSINESS & PERSONAL FINANCE - By Pan Py­las

LONDON — Seven of the 91 Euro­pean banks flunked the “stress tests” aimed at clear­ing up mar­ket fears about the strength of the con­ti­nent’s bank­ing sys­tem amid the debt cri­sis.

In to­tal, the seven banks have to raise 3.5 bil­lion eu­ros (about $4.5 bil­lion) to shore up their fi­nances, said the Com­mit­tee of Euro­pean Bank­ing Su­per­vi­sors, the reg­u­la­tor charged with con­duct­ing the stress tests.

That’s much less than some an­a­lysts had been pre­dict­ing, and the com­mit­tee said Europe’s banks have, over the past cou­ple of years, gone a long way to shoring up their bal­ance sheets.

Some an­a­lysts were un­con­vinced, not­ing that sim­i­lar tests last year in the United States re­sulted in 10 of the 19 banks tested be­ing re­quired to raise $75 bil­lion.

“The stress tests do not seem that stress­ful, and it is look­ing more like a po­lit­i­cal white­wash rather than a gen­uine at­tempt to re­as­sure fi­nan­cial mar­kets,” said Neil MacKin­non, global macro strate­gist at VTB Cap­i­tal. “They are de­lay­ing the day of reck­on­ing.”

By con­trast, pol­i­cy­mak­ers in Europe said the stress test will re­as­sure mar­kets wor­ried about hid­den bank losses from the cri­sis.

The Euro­pean Union called the re­sults a re­sound­ing vote of con­fi­dence that “con­firms the over­all re­silience” of the con­ti­nent’s bank­ing sys­tem.

Was the much-an­tic­i­pated test tough enough to be cred­i­ble? The ver­dict will come on Mon­day, when Euro­pean stock mar­kets re­open.

It had been thought that some banks needed to fail for the ex­er­cise to be ac­cepted as cred­i­ble, and some did: five

Con­tin­ued from B in Spain and one each in Ger­many and Greece. But an­a­lysts still ar­gued the re­sults showed the tests weren’t rig­or­ous enough — and the euro was trad­ing flat af­ter Fri­day’s an­nounce­ment, at about $1.29.

If fi­nan­cial mar­kets take the view the tests were not tough enough when Euro­pean trad­ing re­sumes Mon­day, that could fur­ther ex­pose the Euro­pean Union to charges it has failed to rise to the debt cri­sis within its bor­ders.

In Washington, Trea­sury Sec­re­tary Ti­mothy Gei­th­ner praised the EU’s “sig­nif­i­cant ef­fort to in­crease dis­clo­sure on the con­di­tions of in­di­vid­ual Euro­pean fi­nan­cial in­sti­tu­tions and en­hance mar­ket sta­bil­ity.”

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.