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Wednesday, June 16, 2010

Spain, Germany agree to release bank "stress test" results

by Calculated Risk on 6/16/2010 12:41:00 PM

From the Financial Times: Spain to reveal bank ‘stress tests’ results

“The Bank intends to make public the results of these stress tests, showing estimated loan losses, the consequent capital requirements and the contribution of promised balance sheet reinforcements, so that the markets have a perfect understanding of the circumstances of the Spanish banking system,” [Miguel Angel Fernández Ordóñez, governor of the Bank of Spain, said on Wednesday].
excerpt with permission
And from the Financial Times: Berlin agrees to release stress test results
The German government has dropped its resistance to publishing the results of bank stress tests ... A spokeswoman for the finance ministry said on Wednesday that Berlin was currently “co-ordinating” with its EU partners about how the results of existing annual stress tests could best be presented ...
Transparency is helpful - although this might show a number of banks require additional capital. In the U.S., the government provided capital from TARP until the banks could raise private capital.

Note that the EU and the UK conduct annual stress tests - this is just an issue of making the results public. I think the U.S. should conduct annual stress tests of all the largest financial institutions, and make the economic scenarios and results public every year.