FRANKFURT (MNI) – The following is a statement issued Wednesday by
the Committee of European Banking Supervisors explaining the disclosure
of sovereign debt exposure during the EU-wide stress-testing exercise,
the results of which were announced July 23, 2010.

Today’s announcement comes in the wake of renewed concerns about
banks’ exposure to the sovereign debt of some European countries:

CEBS Statement on the disclosure of sovereign exposures in the
context of the 2010 EU-wide stress testing exercise.

CEBS notes that the EU-wide stress testing exercise conducted on 91
European banks and published on 23 July 2010 was an unprecedented
exercise designed to assess the resilience of the EU banking system to
possible adverse economic developments, in particular shocks to credit
and market risks, including sovereign risks.

Individual disclosures of sovereign exposures were an essential
component of the exercise and a great enhancement in terms of
transparency. This transparency efficiently complemented the design of
the sovereign shocks applied in the adverse scenario of the stress test
exercise, which excluded the possibility of a sovereign default. In
order to harmonize the reporting and to provide a meaningful and
consistent view of banks exposures to sovereign debt, CEBS and national
authorities jointly developed guidance to the participating banks. In
particular:

The “gross exposures” disclosed were on-balance sheet exposures net
of impairments but gross of collateral and hedging. In order to provide
a meaningful picture of the economic risk borne in the trading book,
banks were allowed to deduct offsetting short positions when reporting
gross exposures. CEBS notes that comparison with other sources should be
treated with caution as a result of different reporting dates and
reporting methodologies. For instance, data provided by the Bank for
International Settlements (BIS), is aggregated in a way which makes
comparison with the data disclosed by banks during the CEBS exercise
impossible.

[TOPICS: M$$EC$,M$X$$$,M$$CR$,MT$$$$,MGX$$$]