EU bank stress test markers
21 Jul 2010
Breezy assurances by EU government functionaries in recent weeks that banks from their countries would clear the stress tests have cast a pall of uncertainty over the financial markets. Come Friday regulators will release reams of information about the results of the stress tests, but lack of detail about the parameters adopted for the tests has raised concerns that the tests may choose to glide over problem areas.
Such is the lack of transparency that it is also being feared that different countries could use different methods to test their banks.
The tests are being conducted by the Committee for European Banking Supervisors (CEBS), which is made up of regulators from the European Union's 27 member states. The tests are meant to reveal if the banks under scrutiny have enough capital to cushion their losses in different scenarios, such as deterioration of the European economy or problems with sovereign debt.
Analysts say the stress tests across nations would be considered a success only if they were based on a single scenario and a single methodology. Some feel that European officials were rushed into setting a date to release the test results, and may not have appreciated the complexity of the task.
CEBS, along with national regulators and the 91 individual banks that have been tested , are scheduled to post results on their respective Web sites beginning at 6 pm Paris time on Friday. The European Central Bank and the European Commission too will follow suit.
A total of 91 banks are under scrutiny and these include the largest multinational banks in Europe, such as HSBC and Barclays in Britain, Deutsche Bank and Commerzbank in Germany, and Société Générale and BNP Paribas in France.
