Seven of 91 European banks have failed stress tests and show an overall capital shortfall of 3.5 billion euros, the organisers of the tests said on Friday.Following are comments from policymakers and analysts on the results.KIM CAUGHEY, SENIOR EQUITY RESEARCH ANALYST, FORT PITT CAPITAL GROUP, PITTSBURG"It doesn't seem to have thrown any big surprises. I think the market originally was happy to see this, but now that the big news is out, it is drifting back to the steady state. I don't think this will have any impact on financials here because most of the U.S. banks have passed the stress test here, and there isn't any bank that has the undue amount of exposure to Europe to be influenced by this."CHRIS RUPKEY, CHIEF FINANCIAL ECONOMIST, BANK OF TOKYO/MITSUBISHI UFJ, NEW YORK"Monetary authorities need to reassure sceptical global investors that European banks are money good. Despite questions about transparency and how the Euro stress tests don't measure up to the U.S. tests last year, I think these tests will start to put these Eurozone concerns behind us. There might be some initial disappointment leading to some selling on Monday when European markets reopen, but the market will quickly get over it."The market was asking for too much in the first place. At one point, the world thought U.S. banks were underwater in terms of equity capital because their mortgage assets were severely impaired. This was not true, and the markdowns the market wants to see on the value of Euro sovereign debt on Euro banking books are similarly not true. It is a bit of a witch hunt, with all the finger-pointing going on."SUSANNE HAHL, TRADER AT BAADER BANK, FRANKFURT:"There virtually was no trade after the results have been published. And there were no great surprises either as the big banks have all passed."PETER CHATWELL, RATES STRATEGIST, CREDIT AGRICOLE, LONDON"The names we have seen coming with failures are the smaller ones but no surprises. The important thing is the big names have so far been solid."I don't see enough detail yet in order to say whether they were rigorous enough ... There's always going to be debate about whether this is going to be rigorous enough but it offers hope for people to get more confident about their counterparties."I haven't seen anything which is a concern in the banks that have passed ... If we get enough detail, people will be happy they know what each bank has on its books and we are going to see a slow start to the healing in market confidence. Already government bond spreads are all tightening and that's the sentiment that's still going to be in place (next Monday)."STEPHEN POPE, CHIEF GLOBAL EQUITY STRATEGIST, CANTOR FITZERGERALD, LONDON"I see nothing stressful about this test. It's like sending the banks away for a weekend of R&R."If you see Portuguese and Spanish banks trading higher (on Monday), I will be looking to sell."PHILIPPE GIJSELS, HEAD OF RESEARCH AT BNP PARIBAS FORTIS GLOBAL MARKETS, BRUSSELS"This is not surprising that most of them have passed -- the results are in line with expectations. The market will find good news and bad news in this and the market action on Monday and Tuesday will be very important for the rest of the month. But we will continue to be volatile."MARK O'SULLIVAN, DIRECTOR OF DEALING AT CURRENCIES DIRECTI just think it's a political mish-mash, a bit of a compromise. People will think that the threshold to pass was set too low.ION-MARC VALAHU, GENEVA-BASED INDEPENDENT TRADERIf you're not accounting for the trading book, you're not showing the full picture.FRANCOIS SAVARY, CHIEF INVESTMENT OFFICER AT REYLThese are tests which are not really that significant. They do not appear to be factoring in the risk of a sovereign default, which slightly reduces the quality of the test.HUGH JOHNSON, CHIEF INVESTMENT OFFICER, HUGH JOHNSON ADVISORS LLC, ALBANY, NY"It's not significant. There is some question amongst those that are looking at it as to whether they made it too lenient. The real question is how tough were the stress tests, and there is reason to believe they were not tough enough. This is, to some extent, comforting, but the test was not as rigorous as it might have been."IAN STANNARD, SENIOR CURRENCY STRATEGIST, BNP PARIBAS:"The initial reaction so far suggests the tests were not as stringent as they could have been, and the market remains slightly cautious. We'll get a real reaction next week when the results are fully digested and we get a clearer picture."It's more a case of the methodology and the assumption for these tests, and these were not the most stringent that could have been and there are some questions over that, which is why we saw the euro fall earlier."JAMES HUGHES, MARKET ANALYST AT CMC MARKETS IN LONDON"It was too lenient. We were expecting 10 banks to have failed but only seven failed. No listed banks failed. It hasn't allayed any of the fears that were there, and all the questions that were being asked before are still going to be asked."GERMAN FINANCE MINISTER WOLFGANG SCHAEUBLE"The broad participation in the stress tests and the publication of results is an important step for more confidence on markets. This has increased the transparency about the resilience of European banks."It is a positive sign that all participating German banks without exception fulfil the supervisory requirements even in the unlikely scenario of a serious collapse in growth."Upon assessing the results, it is important to note that in the special case of HRE, the stress test was not able to take into account the restructuring process that has already been launched."Despite the generally pleasing results of the stress tests, it is still necessary to achieve further progress in the consolidation of the Landesbanken sector."BANK OF FRANCE GOVERNOR AND EUROPEAN CENTRAL BANK GOVERNING COUNCIL MEMBER CHRISTIAN NOYER"The hypothesis of a (sovereign) default is excluded because the European states, especially in the Eurozone, have put several hundreds of billions of euros on the table with the support of the IMF to make this hypothesis completely excluded."This exercise is much heavier and more ambitious than the U.S. exercise which focused on only twenty some banks. This one involves two thirds of the European banking assets (and 80 percent in France). It is a very representative sample."THOMAS NAGEL, TRADER AT EQUINET, FRANKFURT:"The results came in as expected so that box can be ticked. However, I wouldn't be surprised if there will be some voices in the market in a couple of minutes that point to the lack of credibility of the tests."VASSILI SEREBRIAKOV, CURRENCY STRATEGIST, WELLS FARGO BANK, NEW YORK"There's no major surprise so far in the results of the tests. Most of the institutions that failed, were expected to do so. Details of the tests still need to be scrutinized but the issue remains whether the tests were too soft on European banks. But it is too soon to determine that at this point."Still, there's nothing in these reports that is a true positive and really supportive to the euro."BULENT BAYGUN, HEAD OF U.S. INTEREST RATE STRATEGY AT BNP PARIBAS IN NEW YORK"Rates backed up by a couple of basis points immediately but given that a lot have passed the general sense is 'is this something credible?' really. So I'm not sure if there is going to be follow-through to the rate backup."If equities begin to react negatively to this as something that is not quite credible...that's going to bring down Treasury rates also.""There are some that are failing but for the most part it looks like all the banks appear to be healthy based on this test."CARY LEAHEY, ECONOMIST, DECISION ECONOMICS, NEW YORK:"The market expectation was that you were going to have about 10 bank failures -- two from Germany, one from Greece and about six from Spain -- and capital shortfalls totalling at least 100 billion euros. Final results of fewer than six failures would have been worse for the market than twelve failures because six failures would lack credibility in the market. It's better to have people believe that the tests have been too tough rather than too easy. The bond market started reacting when it appeared the tests would just be on banks' trading books, not their full books, and that they would not roll in the possibility of a sovereign default."News posted by www.newsinfoline.com
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