Monday, November 29, 1999

IMF joins push for Europe bank "stress test" details

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The International Monetary Fund on Thursday threw its weight behind calls for better information on key European banks' exposure to sovereign debt.The IMF recommendation came on a day when France signalled that publication of fuller results from bank stress tests in Europe could take place within weeks, and European Union leaders broached the issue at a summit."More transparency and better communication may help the market assessment of the French financial system," the IMF said in a statement concerning a regular review of France's economy, the euro zone's second largest after Germany."In the context of the sovereign debt crisis, earlier calls for better information on European -- including French -- banks re-emerged."The authorities and market participants are rightly concerned that certain types of stress tests -- in particular those stressing sovereign risk -- could contribute to a deepening of the crisis."However -- with CEBS coordinated stress tests well under way -- there may be merits in revisiting what information could be released," the IMF said, referring to the Committee of European Banking Supervisors (CEBS), a supervisory body."Similarly, appropriate and coordinated disclosure of key exposures, preferably in a European context, may also provide better guidance to market than publicly available but possibly misleading figures," the statement said.FRENCH BANKS FARED RELATIVELY WELLThe Washington-based IMF said French banks had weathered the financial crisis "comparatively well" but low growth and concerns about European sovereign debt pose new risks."In spite of manageable and diverse exposures, French banks suffer from market perceptions of holdings to sovereign and country risk in Southern Europe, which is likely to increase refinancing cost," said the statement. "Like other European banks, they face pressure on longer-term dollar liquidity."Lending growth throughout the recession of 2008-09 did not fall as much in France as the euro zone average, it said."However, overall credit growth reflects, to an extent, increased lending to households, including for mortgages," said the IMF."The ultimate reason for low lending to the corporate sector remains difficult to assess, but survey-based indicators show that French banks have eased credit conditions, and that low demand is a more important factor."(reporting by Brian Love; editing by John Stonestreet)
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