European Union to publish stress tests on 25 key banks

EUROPEAN Union countries will publish the results of stress tests on the region’s 25 most systemically important banks in July to improve investors’ confidence, EU President Herman Van Rompuy said yesterday.

The bank-by-bank assessments will include forecasts for scenarios including a Eurozone sovereign debt crisis.

Spanish Prime Minister José Luis Rodríguez Zapatero said: “These tests must be demanding. We need to look at the most stringent tests possible in terms of our growth because that will favour our credibility.”

The disclosures, which have yet to be agreed to by Europe’s banks, were greeted as “an important milestone” by Nick Kounis of Fortis Bank. “One of the triggers behind the sharp return in risk appetite we saw last year was the stress tests in the US,” he said.

In a telling move, the EU will relax rules limiting government aid to private companies, allowing nations to recapitalise struggling lenders before the publication of the stress test results. This would be undertaken by individual governments and would not be part of the €750bn (£627bn) EU-wide safety net signed off in May.

Germany was sceptical about exposing its banking sector to public scrutiny, but bowed to pressure from France, Spain and the US. Karl-Heinz Boos of the Association of German Public Sector Banks stated: “Making stress tests public is counterproductive and could in certain cases lead to misperceptions in markets.”