Monday, July 26, 2010

Are We In For Another Banking Crash Due To European Laxity??

"Bank Tests Aren’t ‘Rigorous Enough,’ Oppenheimer Says

Stress tests on European banks were not strict enough and regulators should have taken a broader look, according to Steve Bernstein, chief executive officer of Oppenheimer Investment Asia Ltd.

“The test isn’t rigorous enough. As time goes on, there must be other banks that need to raise more capital,” Bernstein said in an interview in Hong Kong. “The fact that they only look at one part of the portfolio isn’t enough. The test should have looked at the banks’ investment portfolio as well.”

European Union stress tests found that seven banks need to raise 3.5 billion euros ($4.5 billion) of capital. Germany’s Hypo Real Estate Holding AG, Agricultural Bank of Greece SA and five Spanish savings banks didn’t have adequate reserves to maintain a Tier 1 capital ratio of at least 6 percent in the event of a recession and sovereign-debt crisis, lenders and regulators said on July 23.

“I’d have expected more,” said Bernstein. “Only seven banks in Europe have to raise capital. That’s fewer than I expected.”

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