UNITED KINGDOM: Markets on tenterhooks as European banks await release of stress test results
Record ID:
561687
UNITED KINGDOM: Markets on tenterhooks as European banks await release of stress test results
- Title: UNITED KINGDOM: Markets on tenterhooks as European banks await release of stress test results
- Date: 24th July 2010
- Summary: LONDON, ENGLAND, UNITED KINGDOM (JULY 23, 2010) (REUTERS) TRADING FLOOR AT BGC PARTNERS VARIOUS OF TRADERS AT DESKS CLOCK SHOWING TIMES IN VARIOUS TIME ZONES TRADER WITH PHONE (SOUNDBITE) (English) HOWARD WHEELDON, SENIOR STRATEGIST, AT BGC PARTNERS, SAYING: "Markets are by the very nature of the beast very diffident in terms of their attitude and approach to how the EU has conducted these stress tests. They are concerned that the process may have been a little bit too easy. They're concerned that the process might result in too many banks actually passing and not enough being given the alternative that they've got to recapitalise." WHEELDON WITH REPORTER (SOUNDBITE) (English) HOWARD WHEELDON, SENIOR STRATEGIST, AT BGC PARTNERS, SAYING: "Certainly we would expect banks, certain smaller banks or the savings banks in Slovenia, in Spain, in Portugal, and some other countries to actually fail, so we'll be looking at these results very, very carefully and very precisely. We don't expect, having said that, the larger banks in the major EU countries to have failed." MORE OF TRADERS AT DESKS (SOUNDBITE) (English) HOWARD WHEELDON, SENIOR STRATEGIST, AT BGC PARTNERS, SAYING: "The sceptic in me says that announcing this at five o' clock on Friday is in the hope that it will get less attention in the markets. Markets will generally have closed in Europe. The US markets will take less cognisance of what is actually going on here, so the effect, people have had two days to actually think about it before markets re-open open on Monday." VARIOUS OF TICKER TAPE ON REUTERS BUILDING SHOWING SHARE PRICES VARIOUS OF CITIBANK EXTERIORS PEOPLE WALKING PAST CITIBANK EXTERIOR OF NATWEST EXTERIOR OF HSBC EXTERIOR OF BARCLAYS VARIOUS OF PEOPLE WALKING IN CANARY WHARF
- Embargoed: 8th August 2010 13:00
- Keywords:
- Location: United Kingdom
- Country: United Kingdom
- Topics: Finance
- Reuters ID: LVAEST5I1IVMMJBAS5HBDFQWLM0D
- Story Text: European markets are awaiting the results of stress tests on 91 of the continent's banks, which are due to be announced at 1600 GMT on Friday (July 23).
Banks are expected to disclose holdings of doubtful government debt in the results, although sources said there was some last-minute haggling among German banks over how much to reveal.
European bank supervisors are in the final stages of an exercise designed to convince markets that most of the continent's banking sector can withstand another economic downturn and losses on government debt, and that authorities can deal with those banks that need support.
The results are eagerly awaited by markets whose scepticism about the sector has driven up funding costs and weighed on share prices since Greece's debt woes triggered fears the euro zone could unravel.
Howard Wheeldon, senior strategist at BGC Partners, said markets were wary that the tests may not have been strong enough and that some banks needed to fail for the criteria to be seen as credible.
He said: "Markets are by the very nature of the beast very diffident in terms of their attitude and approach to how the EU has conducted these stress tests. They are concerned that the process may have been a little bit too easy. They're concerned that the process might result in too many banks actually passing and not enough being given the alternative that they've got to recapitalise."
Several of Spain's 18 savings banks, including some of those which have been involved in recent mergers, have failed to pass tests to see how they would cope with worsened economic conditions, newspaper El Pais reported on Friday citing financial sources.
It was not immediately clear how the criteria would affect the six Greek banks being tested. Some analysts also consider Germany's quasi-public regional landesbanks to be at risk, but Wheeldon said banks in major EU countries like Germany, France, and Britain were unlikely to fail.
"Certainly we would expect banks, certain smaller banks or the savings banks in Slovenia, in Spain, in Portugal, and some other countries to actually fail, so we'll be looking at these results very, very carefully and very precisely. We don't expect, having said that, the larger banks in the major EU countries to have failed," he said.
Surprise has been expressed at the timing of the results release. Wheeldon said he believed it was an attempt to reduce the impact on markets and predicted that US markets would largely be unaffected
"The sceptic in me says that announcing this at five o' clock on Friday is in the hope that it will get less attention in the markets. Markets will generally have closed in Europe. The US markets will take less cognisance of what is actually going on here, so the effect, people have had two days to actually think about it before markets re-open open on Monday," he said.
According to a survey of investors conducted by Goldman Sachs, 10 out of the 91 banks subjected to the tests were expected to fail.
The Goldman poll of 376 respondents, including hedge funds and long-only investors, showed European banks were on average expected to raise 37.6 billion euros ($48.4 billion US dollars) in extra capital following the tests, it said in a note dated July 22. - Copyright Holder: REUTERS
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