Europe To Reveal Banks' Stress Test Results

EU to go public with solvency data to shore up market confidence as the eurozone debt crisis continues

The results of stress-testing at European banks in all 27 EU countries are to be revealed next month, EU leaders said tonight after months of resisting US pressure to go public.

After an EU summit dominated by worries about the euro and ballooning budget deficits, the EU president Herman Van Rompuy said that disclosure of the stress test results should help to restore confidence in Europe's banking sector.

"There will be full transparency. All member states will take part," added Chancellor Angela Merkel of Germany. She has been previously reluctant to reveal the condition of her country's banks.

France also backed the scheme, while Britain, like Washington, has been arguing for disclosure for some time.

In a speech in Brussels this month, Mark Hoban, the financial secretary to the Treasury, demanded a "genuine, rigorous stress-testing exercise" and urgent action on any bank emerging as a major risk. "Doubts remain over the solvency of some European banks," he warned.

José Manuel Barroso, the European commission chief, said that publication of the results would be on a "bank-by-bank basis". He said: "This should reassure investors by either lifting unfounded suspicion or by dealing with the remaining problems that may exist."

Officials conceded that prompt action was needed to dispel the suspicions over Europe's banks. One senior adviser likened the problem to mad cow disease. "It is enough to have one cow go mad and no one eats beef any more," he said.

Fears for the impact on banks of a sovereign debt crisis in southern Europe meant that the EU could no longer ignore the pressure for greater disclosure. "Now we are obliged to prove that things are going right. If we don't go public, people will think that we're hiding something wrong," said the official.

Amid rumours that the Spanish government was on the verge of requesting help from the €750bn (£630bn) rescue fund, Madrid has been leading the call for stress tests. "There is nothing better than transparency to demonstrate solvency … and leave behind unfounded rumours," José Luis Zapatero, the Spanish prime minister, said tonight.
Germany had feared the results could show up a dire situation in the country's network of state-owned regional Landesbanks. But the German finance ministry said: "Germany is positive on the idea of publishing results."

Other senior officials called for full "transparency and openness", arguing that there was no point in keeping the results secret "in a drawer".
The summit today also reached a consensus on a bank levy and agreed to look at a transaction tax.

The summit, said David Cameron, "very much backed the approach we are taking on a bank levy. This is something we have said we would like international agreement on, but we will go ahead in any event with our bank levy. We don't want to have some sort of European determined bank levy with specific use of the funds."

It remains unclear whether the bank levy will be the same in each country and how the proceeds will be used. It was also clear that divisions remained over the transaction tax on financial markets.

The Europeans are to take both ideas to the G20 summit in Canada next week but are unlikely to engineer a global consensus on either.

Source : guardian