PARIS (MNI) – Senior European bankers and regulators are concerned
that the stress test results of 91 banks, to be published Friday, could
backfire with financial markets because of a lack of transparency and
consistency in the testing methods, the Financial Times reported Monday.
In an article quoting anonymous “senior” sources, the newspaper
cited “deepening concerns” that the stress tests results would be viewed
as a “league table” of European banks based on faulty comparisons.
The paper cited one bank CEO who said, “you need some consistency
across the stress scenarios, particularly on the treatment of sovereign
debt, but it is unclear whether that is the case. Without transparency,
the whole exercise loses credibility.”
Board members of four of the continent’s largest banks expressed
“grave reservations” about the way the stress tests had been conducted
and said they were “worried the markets would misinterpret the outcome,”
the FT reported.
The paper said that the sources cited were from banks that were
expected to pass the stress tests.
“It is not a question of whether we will pass,” said one bank
finance director quoted in the article. “It is that the market will
compare our stressed capital ratio with others that have been calculated
in an entirely different but untransparent way.”
The main scenario in the tests is a situation in which European GDP
is 3 percentage points lower than projections. The banks will also be
tested for low tier 1 capital and a variety of other scenarios that have
not been disclosed.
Results of the tests are expected to be published Friday after
markets close.
[TOPICS: M$$EC$,M$X$$$,M$$FX$,M$$CR$,MGX$$$]