UPDATE 1-EU split over bank tests, finmins vow clarity

* Discussions still over what to publish – Swedish finmin

* Agreement on need for transparency – Belgian finmin

* Source expects 23 pct discount on Greek debt

* Results due July 23 on 91 lenders

(Refiles to correct typo in first paragraph)

By Sarah Marsh and Sophie Taylor

BRUSSELS, July 13 (BestGrowthStock) – European Union finance
ministers remained divided on Tuesday over what data would be
published in banks stress tests due in 10 days but pledged to
make them as transparent as possible.

Like U.S. tests announced in May last year, they are
intended to identify which banks need to raise new capital and
to restore confidence shaken by the euro zone’s recent debt

Belgian Finance Minister Didier Reynders, whose country
holds the rotating presidency of the 27-nation EU, played down
reported differences over what data should be made public.

“We have taken an agreement…about the need to devote to
transparency,” Reynders told a news conference after a monthly
meeting of the finance ministers.

“There is no problem about the choice …It’s only a problem
of coordination, to be sure that we are publishing at the same
moment…all the figures,” Reynders said.

But ministers said divisions remained over the process.

“We are still discussing what we are going to publish from
the stress tests,” Swedish Finance Minister Anders Borg told

The plan is to announce on July 23 how banks would fare if
economic conditions turned worse, including a deeper fall in the
value of sovereign bonds.

The tests will apply, for example, a 23 percent discount on
Greek sovereign debt held in banks’ trading books, a banking
source told Reuters on Tuesday. [ID:nLDE66C1HT]

But there have been splits in the 27-nation EU over how to
model such scenarios and how much to publish once the results
are in from questionnaires sent out to banks last week.

French Economy Minister Christine Lagarde said a final
decision might have to wait until a teleconference of EU finance
ministers set for July 22. “Discussions will continue until the
last minute,” she said.

France was questioning the need to publish the exposure of
banks to sovereign debt and underlined the difficulties of
having a harmonised tier one capital ratio which would enable
comparisons across the EU, sources said.

Germany supported publishing the banks’ sovereign debt
exposure while Britain and Spain were pushing for full
transparency, the sources said.

Stephen Hester, chief executive of Royal Bank of Scotland
(RBS.L: ) supported openness.

“Most things to increase transparency in financial markets
I’m in favour of,” he said at a British Bankers’ Association
conference in London.

The tests cover 91 EU banks accounting for 65 percent of the
bloc’s banking sector. Along with the biggest, the list includes
many German and Spanish regional banks, thought to be among the

Doubts about European banks’ ability to clean up their
balance sheets have limited their ability to raise funding and
made them highly dependent on the massive liquidity taps which
the European Central Bank opened after Lehman Brothers collapsed
in 2008.

“There is still too much turmoil on the markets, partly
because there are still uncertainties over the banks…so that
is why transparency is better,” German Finance Minister Wolfgang
Schaeuble told reporters.

Credit Suisse analysts last week estimated the tests will
indicate European banks need to raise up to 90 billion euros
including 37 billion euros for Germany’s regional banks and 12
billion for Spain’s savings banks.
Bank analysts have estimated that up to 20 lenders might be
directed to raise capital.

Following the U.S. tests last year, several of the 10 found
short of capital swiftly announced fundraising plans of their
own, steering clear of state aid.

Bank of America Inc (BAC.N: ), which had the largest shortfall
at $33.9 billion, announced it would issue $17 billion in common
stock, sell assets and take other steps, for example.

Europe’s banks might raise their own funds, tap national
funds set up in countries such as Germany and Spain, or a 60
billion euro EU fund. If that is not enough, they could turn to
the 440 billion euro European Financial Stability Facility
organised in early May at the height of the euro zone’s debt
crisis. [ID:nLDE66B069]

Olli Rehn, the EU’s commissioner of economic and monetary
affairs, said banks should try to recapitalise themselves by
tapping private investors and that public money should be used
only as a last resort.

“Nevertheless, in case any elements of vulnerability are
identified, systems are in place to deal with them swiftly and
properly,” he said.

The tests are managed by the London-based Committee of
European Banking Supervisors (CEBS), which last week published
two basic assumptions — economic growth falling 3 percent below
official forecasts for this year and next and a shock to
government bonds similar to the situation observed in early May.
No precise figures for that were given.

“This test has some very tough assumptions including another
economic slump which in reality we do not see happening at all,”
ECB Governing Council member Ewald Nowotny told Austrian
broadcaster ORF.

Belgium’s Reynders said test results would be published in
two stages, with those for some subsidiaries of large banking
groups coming about two weeks later.

(Reporting by Ecofin team in Brussels and Steve Slater,
writing by Jan Strupczewski, Editing by Ruth Pitchford, Jason

UPDATE 1-EU split over bank tests, finmins vow clarity