Monday, August 9, 2010

Jenkins: Euro stress tests

Two months on and European markets are still jittery over the prospects for the continent’s banking industry. But this morning, when the markets open, optimists believe a new calm will envelop the sector, following the publication late on Friday of a comprehensive exercise to stress-test 91 of Europe’s biggest banks. Only seven – all of them at least partly public sector – failed, with a combined capital shortfall of just €3.5bn, a result that regulators insist is a tense meeting with Wolfgang Schäuble, Germany’s finance minister, Mr Geithner not only discussed broad policy issues around deficits and financial regulation. This was where the American’s hectoring two-month campaign began to persuade Europe to follow the US example of a year ago and carry out a transparent, comprehensive banking sector stress test.

“There was market pressure and there was pressure from the US,” recalls one top French banker. “Tim Geithner pushed a lot to get this more transparent. His view was, ‘just get money on the table and provide transparency’.”

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