ECB 'will absolutely not' give capital to ailing banks
Published 19/06/2010 | 05:00
THE European Central Bank (ECB) "will absolutely not" provide banks with capital should stress tests show they need it, executive board member Jose Manuel Gonzalez-Paramo said yesterday.
"That is not part of the ECB's functions," he told reporters following the decision by EU leaders to publish the results of tests on European banks. Capital "is up to the governments and national supervisors", he said.
ECB Governing Council member and Bundesbank president Axel Weber said future banking industry stress tests would be more comprehensive than current evaluations and might include holdings of government bonds. EU states should also provide a backstop "if adverse scenarios materialise", he said.
Analysts said, in view of the sovereign debt crisis, bond holdings should be included. Failure to include sovereign debt exposure would "impact the credibility" of the tests, said Ian Gordon, banking analyst at Exane BNP Paribas in London.
"Every piece of withheld data gives sceptics reason to grumble that the tests are not transparent and, therefore, not meaningful," he said.
ECB president Jean-Claude Trichet said the wider European stress tests would be published in the second half of July "at the latest".
He also said the ECB's purchases of government and other bonds would be limited in duration and would not be used to rescue governments from budgetary corrections.
"The bond purchases made on the secondary market cannot be used to circumvent the fundamental principle of budgetary discipline," Mr Trichet said in Moscow. "At the same time, it must be borne in mind that the fiscal position of the euro area is, on average, more favourable in relative terms than that of most other advanced economies."
Germany's BdB banking association, which had opposed making the findings public, changed its stance yesterday.
Last week, Deutsche Bank boss Josef Ackermann said releasing the stress tests would be "very, very dangerous" if government mechanisms to support European banks weren't in place beforehand.
The BdB said yesterday that publication can "contribute to creating confidence and calming the markets" so long as it doesn't leave "room for misinterpretation".
In London, the British Bankers' Association (BBA) said it still opposed publication of data on individual banks. "The results could be misinterpreted and could lead to a run on a sound bank," said Irving Henry, the BBA's policy director of prudential capital and risk.
European stocks rose for an eighth day, the longest stretch of gains in 11 months, and the euro rose to $1.236, as markets reacted favourably to the idea of transparent stress tests.