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European banks to disclose test results

07-23-2010 14:33 BJT

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European banks are expected to disclose holdings of doubtful government debt in stress test results to be released today. But sources say there's last-minute haggling among German banks over how much to reveal. Here's a preview of the test results.

Taking the temperature of the European banking sector.

The eagerly-awaited results of the bank stress tests should reveal just how healthy the continent's lenders are.

91 banks in 20 countries have been scrutinised.

EU officials want to see if the banks can cope with another economic downturn - should there be one - and losses on sovereign debt holdings.

The aim of the tests is to calm the markets and the euro after the turmoil of the sovereign debt crisis.

Nick Beecroft, Senior Markets Consultant at Saxo Bank isn't expecting any shocks.

He said, "This has been a very carefully choreographed piece of theatre that the EU authorities in various guises will be keen to go successfully so I would say that the smart money is on the fact that the results will not be at all shocking, they will bear examination."

Several countries have already said they're confident their biggest banks will perform well.

But nationalised German lender Hypo Real Estate is expected to fail.

For the markets to regain confidence in the banking sector - they have to know where the sore spots are.

He also said, "It wouldn't be any surprise if we saw some failures in the Landesbank sector because of the excess of investments that they've had were originally in mortgage-backed securities and now possibly in sovereign debt. And of course the cajas in Spain are subject to close examination too."

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