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IMF stress tests come early for UK, Germany on Fri Jan 21, 2011 6:40 am
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IMF stress tests come early for UK, Germany
Reuters, FRANKFURT and LONDON
The IMF is running a health check of top banks in the UK, Germany and three more countries just as Europe hammers out details of its own tougher industry “stress test.”
The round of IMF health checks in Europe will start in Britain, three sources said, to be followed by Sweden, the Netherlands, Germany and Luxembourg.
Separately, the European Banking Authority (EBA) plans a tougher test of Europe’s banks than a health check last year, which was slammed for finding only a small capital shortfall just before spiraling problems at banks forced an international bail-out of the Irish government.
The EBA’s test will be based on a capital definition close to core Tier 1, rather than the less-strict Tier 1 ratios used last year, a person briefed by German regulators said.
The number of banks tested will be similar to last year’s 91.
The EBA declined to comment, saying details are still being discussed. The German source said the final list of participants and scenarios would be determined by the end of next month, and by mid-April the results will be sent to national regulators. The EBA was expected to publish the results at the end of June, the source said.
The tests come as a rating agency study found more than 30 of the world’s top banks — including Credit Suisse, Bank of America and Mizuho Financial — have -insufficient capital to withstand a big problem.
Standard & Poor’s said most banks had improved their capital adequacy in the past two years, but many still fell short and the risk-adjusted capital (RAC) positions of banks was “generally a rating weakness.”
The IMF’s Financial Sector Assessment Programs (FSAP) are in-depth analyses of a country’s financial sector and were made mandatory in September for 25 “systemically important” countries, in a move to forestall another global crisis.
The test of the UK’s top banks, including HSBC, Barclays and Lloyds Banking Group, was expected to take several weeks, the sources said.
Tests in all five countries would be conducted in the first quarter of this year, the IMF spokesman said.
“We haven’t had an FSAP for quite a number of years. It is appropriate to do this given a number of things have changed in terms of our financial structure, since the IMF last did full FSAP here,” said Jonas Niemeyer, the Swedish central bank’s head of policy and analysis division.
The EBA’s process was expected to include a liquidity test, which was missing last year.
The heads of Italy’s two biggest banks, UniCredit SpA chief executive Federico Ghizzoni and Intesa Sanpaolo SpA CEO Corrado Passera, welcomed a new focus on liquidity in the new tests by Brussels.
In its study, S&P found the average RAC ratio for the banks was 8 percent at the end of June last year, up from 6.7 percent a year earlier, S&P said.
Germany’s Commerzbank, Austria’s Raiffeisen and Japan’s Mizuho Financial ranked near the bottom of the study, each with RAC ratios of less than 5 percent.
Also faring badly were Credit Suisse and the Canadian Imperial Bank of Commerce — both at 5.8 percent. Deutsche Bank, Lloyds, Bank of America and Citigroup had RAC ratios of below 7.5 percent.
Banks in Japan and Austria had the lowest average ratios, while lenders in Australia, Singapore, Hong Kong and the Nordic countries had the highest.
Reuters, FRANKFURT and LONDON
The IMF is running a health check of top banks in the UK, Germany and three more countries just as Europe hammers out details of its own tougher industry “stress test.”
The round of IMF health checks in Europe will start in Britain, three sources said, to be followed by Sweden, the Netherlands, Germany and Luxembourg.
Separately, the European Banking Authority (EBA) plans a tougher test of Europe’s banks than a health check last year, which was slammed for finding only a small capital shortfall just before spiraling problems at banks forced an international bail-out of the Irish government.
The EBA’s test will be based on a capital definition close to core Tier 1, rather than the less-strict Tier 1 ratios used last year, a person briefed by German regulators said.
The number of banks tested will be similar to last year’s 91.
The EBA declined to comment, saying details are still being discussed. The German source said the final list of participants and scenarios would be determined by the end of next month, and by mid-April the results will be sent to national regulators. The EBA was expected to publish the results at the end of June, the source said.
The tests come as a rating agency study found more than 30 of the world’s top banks — including Credit Suisse, Bank of America and Mizuho Financial — have -insufficient capital to withstand a big problem.
Standard & Poor’s said most banks had improved their capital adequacy in the past two years, but many still fell short and the risk-adjusted capital (RAC) positions of banks was “generally a rating weakness.”
The IMF’s Financial Sector Assessment Programs (FSAP) are in-depth analyses of a country’s financial sector and were made mandatory in September for 25 “systemically important” countries, in a move to forestall another global crisis.
The test of the UK’s top banks, including HSBC, Barclays and Lloyds Banking Group, was expected to take several weeks, the sources said.
Tests in all five countries would be conducted in the first quarter of this year, the IMF spokesman said.
“We haven’t had an FSAP for quite a number of years. It is appropriate to do this given a number of things have changed in terms of our financial structure, since the IMF last did full FSAP here,” said Jonas Niemeyer, the Swedish central bank’s head of policy and analysis division.
The EBA’s process was expected to include a liquidity test, which was missing last year.
The heads of Italy’s two biggest banks, UniCredit SpA chief executive Federico Ghizzoni and Intesa Sanpaolo SpA CEO Corrado Passera, welcomed a new focus on liquidity in the new tests by Brussels.
In its study, S&P found the average RAC ratio for the banks was 8 percent at the end of June last year, up from 6.7 percent a year earlier, S&P said.
Germany’s Commerzbank, Austria’s Raiffeisen and Japan’s Mizuho Financial ranked near the bottom of the study, each with RAC ratios of less than 5 percent.
Also faring badly were Credit Suisse and the Canadian Imperial Bank of Commerce — both at 5.8 percent. Deutsche Bank, Lloyds, Bank of America and Citigroup had RAC ratios of below 7.5 percent.
Banks in Japan and Austria had the lowest average ratios, while lenders in Australia, Singapore, Hong Kong and the Nordic countries had the highest.