EU edges towards disclosing bank ’stress tests’

France on Thursday joined calls for the release of “stress test results” on the solidity of Europe’s banks, urging a coordinated European approach to the publication of findings “the sooner the better”.

Christine Lagarde, French finance minister, said French banks supported the release of stress test results and she hoped they would be published in the “next few weeks” and “certainly” by the end of July.

Significant hurdles to the release of test results on the health of Europe’s banksacross the European Union fell away on Wednesday when Germany dropped its resistance to the idea and Spain’s central bank said it would act to dispel doubts about its financial institutions.

The moves suggested EU leaders were preparing a decisive response to the turmoil in financial markets by trying to boost confidence in the eurozone banking system.

A senior French official said that it was unlikely that a decision on publication of stress tests would be taken at Thursday’s summit of EU leaders in Brussels, although it was likely to be discussed.

The European Central Bank believes greater transparency in member states’ banks would help to assuage investors’ fears and has been exerting intense pressure behind the scenes.

“The (French) tests are not yet complete and we will stress the system a little more to make the results more credible (but the conclusion that we can draw) is that the ratios hold well for all the system,” Ms Lagarde said in an interview with Reuters. “If someone suspects you have an illness, it’s all very well to say no, no, no I’m very healthy, but it’s even better if you say ok, fine, take my blood and make sure that I’m healthy.”

“There is nothing more damaging than rumours, suspicion, doubts and uncertainty. What’s best for markets, operators and investors, is the reality of numbers, figures, percentages as long as they are accurate and honest.”

French government officials say they have always been prepared to publish stress tests — either by country or by individual banks. But French banks have insisted on releasing findings as part of a coordinated EU approach which was until recently impossible because of German objections.

“The sooner European banks can on a coordinated basis … publish results — and I’m talking results of stress tests — the better”, Ms Lagarde said.

Germany’s finance ministry said on Wednesday it was “co-ordinating” with its EU partners about how the results of existing annual stress tests could be presented.

Other German officials said privately that the government had told EU and G7 partners it was now “in principle in favour” of publication, in the hope more transparency would stop speculative attacks on bank shares. The officials added that a deal could be reached as soon as today, when EU leaders meet in Brussels.

Berlin’s resistance had raised suspicions that it was worried about what the results would show and did not want to be seen as yielding to pressure from the markets and US and UK lobbying. French officials signalled support in principle for publishing tests.

Spanish officials and bankers believe investors and speculators harbour exaggerated fears over Spanish banks, when other countries’ are often weaker or have been bailed out with government money.

Miguel Ángel Fernández Ordóñez, governor of the Bank of Spain, said that stress tests had been carried out to verify that commercial banks, savings banks and co-operative lenders had enough capital available to support even difficult growth scenarios.

“The Bank intends to make public the results of these stress tests, showing estimated loan losses, the consequent capital requirements and the contribution of promised balance sheet reinforcements, so the markets have a perfect understanding of the circumstances of the Spanish banking system,” he said.