Europe needs dose of US medicine

Financial Times
January 10, 2011

The timing of the next round of bank stress tests in Europe and the US looks set to coincide. Over the next couple of months both regulators will impose another set of economic stress scenarios on their biggest banking groups with the aim of reassuring themselves – and the markets – that the banks are strong enough to withstand another financial crisis.

But if the scheduling is coming together, the results this time are likely to go in opposite directions.

Booming US banks are keen to use the exercise to rubberstamp a hike in dividend pay-outs – blocked until now by US regulators.

Meanwhile, some in Europe – particularly in the peripheral eurozone nations – are braced for tougher treatment after last summer’s European tests were criticised for their leniency, with only seven small banks failing out of 91 tested.

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