UPDATE 1-ECB’s Trichet says bank stress tests nearly complete

(Adds Geithner on European stress tests)

By Huw Jones and Sophie Taylor

BUSAN, South Korea, June 5 (BestGrowthStock) – Europe is close to
completing stress tests on its banks to gauge their ability to
withstand a market slump and the results should be published to
help restore market confidence, top European Central Bank
officials said on Saturday.

Washington has been urging Europe to conduct such tests in
the belief that publishing similar assessments of U.S. banks heed
bolster confidence on Wall Street and prodded banks to raise
needed extra capital.

The ECB said last week that euro zone banks faced potential
writedowns totalling 195 billion euros by the end of 2011.

Speaking after a meeting of Group of 20 finance ministers and
central bank chiefs, ECB President Jean-Claude Trichet said he
expected the authorities to take stock of the stress test
exercise done according to guidelines from the ECB and the EU’s
executive, the European Commission.

“I expect appropriate communication will take place at that
moment,” Trichet told a news conference.

The tests are being conducted by the Committee of European
Banking Supervisors (CEBS) which is made up of the EU’s 27
national bank regulators.

The results will be passed on to EU finance ministers.

Details of a previous test were made public only in broad
terms with no reference to individual banks.

Mario Draghi, the Bank of Italy governor who heads the
Financial Stability Board, said Europe should take a leaf out of
Washington’s book and publish the results.

“The decision of the U.S. government to undertake these tests
last year and publish them had a very beneficial impact both on
the market and on the banks themselves,” Draghi told reporters in

“It clears the air and basically puts the banks in a
condition they would be able to raise capital. I think we should
aim at doing the same,” said Draghi, who is also a member of the
ECB governing council.

U.S. Treasury Secretary, Timothy Geithner, urged Europe to
make further efforts to restructure and recapitalise its banks.

In response to a question on whether Europeans should take
additional steps, such as disclosures of stress tests, Geithner
said the basic commitment to transparency in America’s bank
stress tests had been critical to recapitalising banks.

“Markets work better when people have a better sense of how
to assess risk, markets work better when they’re not operating in
the dark,” Geithner told a news conference in Busan.

European banks needed to undertake a serious effort to
improve their transparency, Draghi said.

Italy’s banks are properly capitalised and not under threat
from market volatility due to worries over the economic problems
of Hungary and Greece, Draghi added.

Investment Analysis

(Reporting by Huw Jones, Sophie Taylor and David Lawder, Writing
by Alan Wheatley; Editing by Tomasz Janowski)

UPDATE 1-ECB’s Trichet says bank stress tests nearly complete