UK bank "stress tests" could start this week

City A.M. Reporter
A team from the International Monetary Fund will ask the UK's biggest banks for detailed information this week as it assesses the health of lenders in five European countries.

The IMF is checking UK banks before wider "stress tests" by the European Union, three industry sources told Reuters. A separate source said the team was expected in Sweden next month or early March.

The IMF said late yesterday that was conducting what it called "routine" stress tests of financial systems in the UK, Sweden, the Netherlands, Germany and Luxembourg.

The EU has come under pressure after finding only a small capital shortfall among banks last year, just before spiralling problems at banks forced an international bail-out of the Irish government.

The IMF's Financial Sector Assessment Programmes, or FSAPs, were made mandatory in September for 25 "systemically important" countries, in a move to forestall a repetition of the global credit crisis.

Established in 1999, they are "a comprehensive and in-depth analysis of a country's financial sector," according to the IMF website.

The test of the UK's top banks, including HSBC, Barclays and Lloyds Banking Group, is expected to take several weeks, sources said.

The tests in all five countries will be conducted in the first quarter of this year, the IMF spokesman said.

The European Banking Authority will similarly test its financial sector in a tougher repeat of last year's health check. Some 90 banks are expected to take part and the results are due to be unveiled around July.

The IMF said its tests are supposed to take place every five years. It will be the first test in Sweden in almost a decade, however. Results are expected to be published after discussions by the IMF board in the summer.