Pressure mounted on Europe to reveal the viability of its crisis-hit banks after a meeting of G8 finance ministers in southern Italy over the weekend ended in disarray over the thorny issue.
Britain and the US have already carried out “stress tests” to gauge the capital requirements of their banks — a painful exercise seen as boosting confidence in a sector at the epicenter of the global economic crisis.
But Berlin has resisted calls for tests on its banks saying they could undermine fragile economic confidence. London, meanwhile, warned its European partners that their failure to clean up banks could hold back Britain’s recovery.
The contentious issue was not even mentioned in a statement at the end of the G8 meeting despite it dominating on the sidelines of the talks.
“The uncomfortable truth for Europe is that, however flawed it might have been, the US stress test exercise has so far proved effective in bolstering confidence and helping banks to raise capital,” said Marco Annunziata, chief economist at Italian banking giant Unicredit.
“Eurozone policymakers appeared somewhat divided against criticism that Europe has not yet undertaken a coordinated and transparent stress testing of its major financial institutions,” he added.
Annunziata said the tests, which last month showed that 10 big US banks need US$74.6 billion in extra capital, were “the most important recent effort to restore confidence in the financial system.”
Asked about the tests, G8 meeting host and Italian Finance Minister Giulio Tremonti said they should be coordinated at the European level and added: “In Europe we haven’t begun speaking about stress tests.”
“Each one of us is following its own schedule,” French Finance Minister Christine Lagarde said. “We’re not looking at the example of this or that country.”
“We’re not hiding anything under the carpet,” she added.
Canadian Minister of Finance James Flaherty took a more conciliatory tone after the meeting, saying he was “much less frustrated now” after he said Europe had agreed to report on the results of bank stress tests on a systematic basis.
“The difference of opinion now is whether one reports with respect to the results of specific institutions and name the institutions or whether one reports about one’s system,” Flaherty told reporters.
Speaking earlier this month, however, German Finance Minister Peer Steinbrueck voiced skepticism on the tests.
“We are for a stress test of the whole system not with a view of the specific capital situation of banks,” Steinbrueck said, adding that publication of the results as Washington has done could prove “counterproductive” by jolting investors.
“There is a clear difference between the banks in Europe and in the United States,” he said.
EU finance ministers have agreed to subject their biggest banks to tests in the coming months to check for nasty surprises lurking on their balance sheets. The aim is not to identify which banks need more capital and how much, but rather to spot the risks that may threaten the broader financial sector.
The IMF has urged Europe to carry out these tests as part of a “resolute and coordinated clean up of the banking system” which it said was “essential” for restoring confidence in the financial sector.
“Europe can hardly afford a piecemeal approach which perpetuates uncertainty, leaves private investors sidelined, and allows government involvement in the sector to weigh on overall efficiency,” the IMF said.
MORE VISITORS: The Tourism Administration said that it is seeing positive prospects in its efforts to expand the tourism market in North America and Europe Taiwan has been ranked as the cheapest place in the world to travel to this year, based on a list recommended by NerdWallet. The San Francisco-based personal finance company said that Taiwan topped the list of 16 nations it chose for budget travelers because US tourists do not need visas and travelers can easily have a good meal for less than US$10. A bus ride in Taipei costs just under US$0.50, while subway rides start at US$0.60, the firm said, adding that public transportation in Taiwan is easy to navigate. The firm also called Taiwan a “food lover’s paradise,” citing inexpensive breakfast stalls
TRADE: A mandatory declaration of origin for manufactured goods bound for the US is to take effect on May 7 to block China from exploiting Taiwan’s trade channels All products manufactured in Taiwan and exported to the US must include a signed declaration of origin starting on May 7, the Bureau of Foreign Trade announced yesterday. US President Donald Trump on April 2 imposed a 32 percent tariff on imports from Taiwan, but one week later announced a 90-day pause on its implementation. However, a universal 10 percent tariff was immediately applied to most imports from around the world. On April 12, the Trump administration further exempted computers, smartphones and semiconductors from the new tariffs. In response, President William Lai’s (賴清德) administration has introduced a series of countermeasures to support affected
CROSS-STRAIT: The vast majority of Taiwanese support maintaining the ‘status quo,’ while concern is rising about Beijing’s influence operations More than eight out of 10 Taiwanese reject Beijing’s “one country, two systems” framework for cross-strait relations, according to a survey released by the Mainland Affairs Council (MAC) on Thursday. The MAC’s latest quarterly survey found that 84.4 percent of respondents opposed Beijing’s “one country, two systems” formula for handling cross-strait relations — a figure consistent with past polling. Over the past three years, opposition to the framework has remained high, ranging from a low of 83.6 percent in April 2023 to a peak of 89.6 percent in April last year. In the most recent poll, 82.5 percent also rejected China’s
PLUGGING HOLES: The amendments would bring the legislation in line with systems found in other countries such as Japan and the US, Legislator Chen Kuan-ting said Democratic Progressive Party (DPP) Legislator Chen Kuan-ting (陳冠廷) has proposed amending national security legislation amid a spate of espionage cases. Potential gaps in security vetting procedures for personnel with access to sensitive information prompted him to propose the amendments, which would introduce changes to Article 14 of the Classified National Security Information Protection Act (國家機密保護法), Chen said yesterday. The proposal, which aims to enhance interagency vetting procedures and reduce the risk of classified information leaks, would establish a comprehensive security clearance system in Taiwan, he said. The amendment would require character and loyalty checks for civil servants and intelligence personnel prior to
RSS