Recent stress tests carried out in Europe show most European banks have enough capital and don’t need additional capital buffers to withstand the current crisis, BNP Paribas Chairman Michel Pebereau said Monday.
Stress tests carried out at the European level at the end of July “don’t obviously show that the European banking system as a whole needs more capital,” Pebereau told a conference organized by Paris-based think-tank Institut Montaigne.
Pebereau said most of the banks scrutinized by the new European banking regulator passed these tests, with only eight out of a total of 90 banks tested failing them.
Pebereau’s comments come as recent remarks by the new International Monetary Fund managing director, former French finance minister Christine Lagarde, have raised eyebrows among large banks. She has called for banks to bolster their capital buffers in the face of the ongoing sovereign debt crisis in the euro zone.
Several banking officials pointed out after Lagarde’s comments that most global banks have already undergone a round of recapitalization in the wake of the 2008 financial crisis.
Even as he recognized that “utter transparency” and more oversight on banks is needed, Pebereau said efforts to better police the global financial system shouldn’t hinder credit to the economy.
In particular, he repeated his opposition to a capital surcharge being slapped on systemic banks–a measure that is recommended by the Financial Stability Board, the body advising the Group of 20 industrialized and emerging nations on financial reform.
Instead, Pebereau said, systemic banks should be subjected to tighter supervision.
Pebereau also warned against implementing new envisaged liquidity rules for banks without further assessing potential risks related to the new standards. Under the Basel-III framework, banks will be required to hold more government bonds as part of their most liquid assets.
“We have to know whether when banks are holding government bonds, investors think that they are in danger,” he said.
Paris, September 5, 2011, (Dow Jones)
