European Regulators Resist Individual-Based, Public Stress Test on Banks

The WSJ is running a piece today (entitled "U.S. to Press Europe for Tougher Bank Stress Tests") discussing how the Obama administration is pressuring European officials to force their banks to undergo more rigorous, individually-focused, public stress tests. The reports follow rumors last month that members of the IMF have also pushed European regulators to impose stricter guidelines, supposedly following in the footsteps of the U.S.

As of now, the EU is planning confidential, broad-based stress tests which will strictly focus on the European banking system as a whole.

Treasury Secretary Timothy Geithner is expected to address the issue later this week in Italy at a closed-door meeting of the Group of Eight leading nations. While the IMF seems to have Geithner's back, numerous European authorities are rejecting the idea of making the results public as they argue that such a move would undermine confidence in Europe's banking system.

The question that certainly remains: do U.S. regulators really have any room to talk? Let us recall that these are the same officials who created stress test guidelines looking for an unemployment rate of 8.9% and 10.3% in '09 and '10, respectively, in an adverse scenario! News flash Ben and Tim... the unemployment rate is already at 9.4%...

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