–No Need For Another Stress Test For European Banks

By Yali N’Diaye

WASHINGTON (MNI) – European Central Bank Governing Council member
Christian Noyer said Thursday that while the worst outcome is unlikely
for Greece given Europeans’ efforts avoid it, European banks could
withstand writing down 100% of their debt exposure.

Asked during a joint press conference with French Finance Minister
Francois Baroin following a working dinner of G20 finance ministers
whether more stress tests were needed given the worsened economic and
financial environment since the last tests were performed, Noyer said
there was no need for more.

“I don’t think there is any need for another stress test,” Noyer
said, pointing out that the tests that were performed last summer were
“rigorous with very tough economic scenarios.”

“Everyone recognizes that,” he said.

The issue, Noyer continued, not just for French banks but also for
European banks, is the sovereign risk, and Greece in particular.

And on that front, Noyer tried to reassure nervous markets that
European banks could withstand writing off even the totality of the
Greek exposure, a scenario he deemed “unlikely.”

Referring to the worst case scenario, Noyer said, “I do not
believe, we do not believe that is at all the likely outcome” given
efforts by Europeans to avoid it and to allow Greece to come back on a
sustainable path through the implementation of the troika program.

“Even in the worst case,” Noyer said, with banks forced to write
down 100% of the Greek exposure, for instance, “it’s something we can
perfectly withstand.”

“It would be absorbed in less than one quarter of profits.”

In fact, “It could have been done in the second quarter.”

That said, he urged European banks to improve their communication
towards the markets.

“We have asked the banks to clearly explain to the markets
themselves,” he said, given the focus on Greece.

“We certainly encourage them to have a very clear communication to
reflect on how to present their financial results for the next quarter.”

** Market News International Washington Bureau: 202-371-2121 **

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<G20 to Take "All Necessary Actions" to Protect Banks During Crisis

By Jack Duffy

WASHINGTON (MNI) – Finance ministers and central bankers from the
Group of 20 countries said Thursday night that they would provide their
banks with as much liquidity as necessary to confront the current
financial crisis.

In a surprise communique issued after a first day of talks here
at the annual meetings of the International Monetary Fund and the World
Bank, the G20 said it would take "all necessary actions to preserve the
stability of banking systems and financial markets."

The communique added that, "We will ensure that banks are
adequately capitalized and have sufficient access to funding to deal
with current risks."

At a late-evening press conference, French Finance Minister
Francois Baroin said the decision to issue a communique reflected the
seriousness of the current market turbulence.

Amid fears that a deteriorating European debt crisis will tip the
world economy into a new recession, financial markets plunged worldwide
on Thursday, with the Dow Jones industrial average dropping 391 points.

"We are gong to manage this situation with courage, with method and
according to a calendar," Baroin said of the debt crisis.

Lacking specifics, however, the G20 statement appeared to
disappoint markets in Asia, with Japan's Nikkei 225 stock
average initially falling more than 2% early on Friday.

The communique said the G20 economices were "committed to a strong
and coordinated international response to address the renewed challenges
facing the global economy, notably heightened downside risks from
sovereign stresses, financial system fragility, market turbulence, weak
economic growth and unacceptably high unemployment."

In the Eurozone, the communique said the 17-nation bloc "will have
implemented by the time of our next meeting the necessary actions to
increase the flexibility of the EFSF and to maximize its impact in order
to address contagion."

Baroin and Bank of France Governor Christian Noyer said at the
press conference that it was of crucial importance that European
countries quickly implemented the decisions taken and the July 21 summit
in Brussels.

"This will be the correct answer to reassure markets," Noyer said.

** Market News International Washington Bureau: 202-371-2121 **

[TOPICS: M$$EC$,M$C$$$,M$U$$$,MN$FX$,MT$$$$,MI$$$$,M$J$$$,M$X$$$,M$A$$$,M$Q$$$]