–Decision Points To Division Among EU’s 27 Finance Ministers

BRUSSELS (MNI) – A decision to delay releasing some details of
European Union bank stress test results means markets won’t have a full
picture of the health of Europe’s banking sector until at least
mid-August.

European Union heads of state agreed last month to make the results
of bank stress tests public in a bid to shore up investor confidence in
its banks. Ninety-one banks will undergo stress tests, representing
around 65% of all the banking assets in the EU.

But after repeatedly saying they were committed to full
transparency, European Union finance ministers Tuesday agreed to stagger
the announcement of the test results, releasing on July 23 aggregate
information and individual overview data for each of the 91 banking
institutions being tested, followed more details two weeks later.

Information about individual national subsidiaries of large banking
groups will be released two weeks later by national banking regulators,
at their discretion, EU diplomats said.

“The consolidated results are not part of the [overall stress
testing] exercise,” one EU diplomat said. “That is a supplementary
exercise carried out by a few member states to give more information on
the subsidiaries.”

Confusion mounted after EU officials failed to clarify which
countries would be carrying out supplementary tests and why.

That could leave investors lacking vital information because many
of the EU’s largest banking groups have subsidiaries in multiple EU
countries.

For example, one of the UK’s largest banks, HSBC Bank plc, has
operations in the Czech Republic, France, Germany, Ireland and Malta.

Austria’s Raiffeisen International Bank has subsidiaries in 15
central and eastern European countries including Bulgaria, the Czech
Republic, Hungary, Poland, Romania, Slovakia and Slovenia.

One explanation is that EU policymakers can’t agree over how
transparent to be because, despite all the talk about the merits of full
transparency, they still haven’t told anyone what they mean by it.

Some may have opted to go further than others by releasing results
of individual subsidiary stress tests. Who will do that, however, isn’t
yet clear.

UK Chancellor of the Exchequer George Osborne said EU bank stress
testing “needs to be seen as credible, the market needs to feel, the
public needs to feel, that…there’s been an appropriate stress tested,”
he said.

“We are confident that overall the European banking system is
strong and resilient,” EU Economic Affairs Commissioner Olli Rehn said.

“In case any elements of vulnerability are identified, systems are
in place to deal with them swiftly and properly,” he told reporters in
Brussels.

The preferred way for banks that fail the stress test to raise more
capital would be via the markets, Rehn said.

“If that is not possible for some reason then the next line of
defence would be the national financial backstops,” he added. As a last
resort, European facilities can be tapped, Rehn said, but he added that
he didn’t think that need would arise.

–Brussels: 0032 487 (0) 32 803 665, echarlton@marketnews.com

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