Bank stress tests set to be delayed until late October

The results of a wide-ranging review of Europe’s banks are likely to be published later than the Oct. 17 date pencilled in with the banks but will still be released before a formal deadline of end-October, people familiar with the matter told Reuters.

The European Central Bank (ECB) is looking at how 130 of the eurozone’s largest banks value their assets.

Those banks will also undergo EU-wide tests on whether they have enough capital to weather future crises.

The ECB had informally pencilled in Friday, October 17, as the date for publication of the results of the combined exercise and had given this date to some banks. The sources told Reuters that this date was now very unlikely to be met.

Two sources told Reuters they had been told that Friday, October 24, was now the most likely date.

A third source said a decision on the publication date on had not yet been taken, but that it could also be Friday, October 31.

Results of this nature are traditionally released after financial markets close on Fridays to give investors time to digest them before trading resumes on Monday morning.

The ECB takes over as the euro zone’s banking supervisor on November 4 and has said it will have the assessment completed by the end of October.

“We will make public the exact date in the next couple of weeks,” the ECB said. “We’ve always said the second half of October.”

The London-based European Banking Authority (EBA), which is responsible for the EU-wide tests, said no final decision on the date had been made.

“As soon as the publication date is approved (and this will be done in the coming weeks and jointly with the ECB), we will be announcing it,” the EBA said.

Banks will get “partial preliminary results” about a month before the final announcement so they can make plans for how to deal with any major shortfalls, Reuters reported on Sept 1.

They will only be given about 48 hours notice of their actual results, to minimise the chance of information leaking out to investors who could trade on it.

A survey by Goldman Sachs last week found that investors expect banks to be asked to raise an additional €51bn as a result of the exercise.

Royal Bank of Scotland Plc, Britain’s biggest state-owned lender, and Lloyds Banking Group are among the seven banks set to fail the tests, Mediobanca forecast yesterday.

Mediobanca said it also expects Banco Popular Espanol, Commerzbank, Danske Bank, Banca Monte dei Paschi di Siena and Skandinaviska Enskilda Banken to fail.

Mediobanca added that another three banks – Caixa Bank, Nordea Bank and Alpha Bank – may “quasi fail.”

“We see the UK accounting for 71pc of the capital needs,” followed by Spain, Scandinavia, Germany and Italy, the analysts wrote.

Moody’s cut the outlook for the UK banks to negative from stable last month.

Irish Independent
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