U.S. Stress Tests Augur Well for EU's, BlackRock's Fisher Says: Tom Keene
Europe should benefit from its bank stress tests if they’re anything like the U.S.’s assessment of its biggest financial firms last year, according to Peter Fisher of BlackRock Inc., the world’s largest asset manager.
“We all harped on the stress tests in the U.S. and said they weren’t realistic,” Fisher, BlackRock’s vice-chairman and head of fixed-income portfolio management, said today in a radio interview with Tom Keene on Bloomberg Surveillance. “They turned out to be pretty accurate predictors of what was likely to unfold and which balance sheets were under stress.”
European regulators will release stress-test results on July 23 after determining whether 91 banks can survive potential losses on sovereign-debt holdings. Firms failing to meet the standard will be required to raise extra capital.
Last year the Federal Reserve gave stress tests to the nation’s largest 19 banks and said 10 needed to raise a total of $74.6 billion of capital. The tests were designed to show how the firms would fare in a deeper, longer recession.
Fisher, a former U.S. Treasury undersecretary who is based in New York, said he will look to see whether European regulators compared “apples to apples,” conducting each bank’s test consistently, and whether the results reveal with “candor” which banks need assistance.
“That would actually be the good news for the market, that we can identify those firms that have to step up and raise a little capital,” Fisher said. “Separating the sheep from the goats is the big benefit.”
Enough transparency is needed to disclose the kinds of scenarios the tests simulated, which would allow observers to “gauge the results to see whether it feels like they’ve actually done that,” he said.
Bloomberg moderates all comments. Comments that are abusive or off-topic will not be posted to the site. Excessively long comments may be moderated as well. Bloomberg cannot facilitate requests to remove comments or explain individual moderation decisions.