Europe reveals list of banks for stress tests
EUROPE listed 91 banks taking part in financial stress tests – including many regional banks where markets suspect most of the sore spots are – as it seeks to restore confidence.
Providing some, but not nearly all, details of so-called stress tests markets have been demanding for weeks, a regulatory committee said it would test how banks held up if the economy and markets deteriorated.
“The exercise is being conducted on a bank-by-bank basis using commonly agreed macro-economic scenarios,” the Committee of European Banking Supervisors (CEBS) said.
“[It] also envisages adverse conditions in financial markets and a shock on interest rates to capture an increase in risk premia,” in bond markets, said London-based CEBS.
The scenarios would show a different impact on the various European Union member states, said CEBS, a little-known group of European Union national finance regulators.
The banks – ranging from Germany’s Deutsche Bank to Malta’s Bank of Valletta – comprised 65 per cent of the European banking sector, the group said.
Most of Europe’s large banks that operate in more than one country were on the list, which also showed many German and Spanish regional banks, the so-called landesbanks and cajas respectively, thought to be among the weakest.
But there was less detail than many in markets might have hoped for in the document, which listed two basic assumptions. One was that the adverse scenario would assume economic growth three per cent below official Brussels forecasts.
The shock to government bonds would assume a deterioration of market conditions similar to the situation observed in early May 2010. Europe’s bond markets have been plagued by the fear of a government defaulting.
“What is lacking here is information on detailed assumptions,” said one London-based banking analyst.