The French banks that will come under the spotlight are BNP Paribas, Crédit Agricole, BPCE and Société Générale. They will have no problem passing the test, according to Finance Minister Christine Lagarde, although France’s banks hold about a third of crisis-hit Greece’s debt.
The report by the Committee of European Banking Supervisors checks on a number of criteria including:
- whether banks are capable of facing another severe economic downturn;
- how they would cope if markets lost confidence in their holdings in government debt;
- how dependent they are on their government’s support.
The test is the second of its kind. The first took place in 2009 but was less far-reaching, covering only 22 big banks, while this year’s covers 91.
The report is also more transparent than 2009’s, which gave its findings by country. The 2010 version will publish its results bank by bank, a decision that was taken after pressure from markets, the European Central Bank (ECB) and the International Monetary Fund.
“According to persistent rumours,” writes Altin Lazaj of RFI’s French service, “the initiative came from the Spanish banks because they have difficulty refinancing on the interbank market.”
ECB President Jean-Paul Trichet on Friday called on major industrialised countries to cut spending increase taxes now, contradicting US calls to prolong stimulus packages until the recession is definitively over.
German business confidence on Friday showed the fastest rise in 20 years, according to the Ifo index, while British growth was at its strongest since 2006, at 1.1 per cent in the second quarter of 2010, according to the Office for National Statistics.