EU to publish bank stress test results
In a controversial move it has been revealed that European leaders will publish the result of banking stress tests on 25 of Europe's largest banking institutions. The data will be released in the second half of July in an attempt to try and calm investment markets which have been concerned about the banking sector for some time. But could this strategy backfire?
When you consider the very different approach taken by the Bank of England, i.e. a refusal to publish the results of bank stress tests, the EU approach is very open but potentially very controversial. Not only will the results show which banks have passed the various stress tests but they will also show which banks have failed and which ones were "borderline". There are fears this could give investors an "inside knowledge" of the strength of any banking institution in Europe and potentially allow them to adjust their investment ideas accordingly.
There is the potential for greater investment in the "stronger banks" while there is also the potential for "shorting" and other perfectly legal activity to make money from weaker banks. Whether or not this is a step too far by the European Union remains to be seen but the more information which is passed to investors and the public in general the more information they will demand - now that the confidentiality line has been crossed.
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