Strictly Focused on Stress Test as Man. United Play: Euro CreditJohn Glover and Katie Linsell
Manchester United will play Chelsea and Strictly Come Dancing will flit across British TV screens unwatched by London’s financiers on Sunday. They’ll be focused on the outcome of the widest-ranging review of Europe’s financial system.
Results of the health check for the region’s 130 most important lenders are being presented before lunch. There’ll then be analyst calls with regulators followed by internal conferences at banks and brokerage firms. Societe Generale SA plans to speak with clients, while BNP Paribas SA has its conference call set for 7 p.m., before Downton Abbey airs later in the evening.
“It’s all going to be very exciting,” said Filippo Alloatti, who helps oversee about $47 billion as an analyst at Hermes Fund Managers Ltd. in London and will be in the office on Sunday to avoid distractions at home. “My sixth sense tells me that when everyone thinks there’ll be no surprises, that’s when you get them.”
Alloatti, an Inter Milan supporter, said he wanted to watch the soccer, one of the biggest games of the season, because he’s a fan of Chelsea’s manager Jose Mourinho.
The check-up that’s keeping financiers at their desks on a weekend has taken 12 months to carry out and involved about 6,000 people exploring the nooks and crannies of the region’s biggest lenders. It’s a prelude to the European Central Bank taking over as single supervisor of the euro zone’s banking system from next month.
There are tests to make sure banks are strong enough and have sufficient liquid assets to withstand a financial crisis. Those who fail will have two weeks to set out how they plan to make good the shortfall.
“I’ll be on calls and going through data,” said Gildas Surry, a banking analyst at BNP Paribas in London, who plans to spend Sunday afternoon at the office. “Their views will drive the price action on Monday morning.”
Among the issues exercising bankers, analysts and investors is who will pass and who will be forced to raise capital. Previous rounds of Europe-wide stress tests since the financial crisis were viewed by banking analysts as too lenient, making this review an assessment of the ECB as an effective supervisor.
“This isn’t just a test of the banks, it’s a test of the ECB’s credibility,” said Suvi Kosonen, senior bank credit analyst for ING Bank NV in Amsterdam, who will be in the office on Sunday writing commentary, and risks missing the final episode of Heel Holland Bakt, the Dutch version of the U.K.’s Great British Bake Off. “They need to make sure some banks fail for the results to be taken seriously.”
Spot-the-looming-failure is a game analysts and the media are playing in the run-up to the big moment, one which the ECB calls “highly speculative.”
“This is an unprecedented event and that’s created excitement,” said Paola Biraschi, London-based head of financial credit strategy at Royal Bank of Scotland Group Plc who will host ad-hoc calls with investors on Sunday afternoon from the office. “It will feel like a working day.”
Her colleague Alberto Gallo, head of European macro credit research, said he’ll probably be in the office and definitely on the phone.
Eva Olsson, a London-based analyst at Mitsubishi UFJ Securities International Plc, won’t be in the office that day because she’s in the U.S. on business.
“My family will probably check out the sights in New York while I’m working,” said Olsson, who plans to log on from the hotel. “Even with very little data it’s going to be very market sensitive.”
Her 10-strong team will all be logged on, she said.
The review has involved 26 national supervisors and shone a spotlight on about 85 percent of the region’s banking assets, according to the ECB’s website.
“This is a huge, massively complicated exercise,” said Simon Adamson, an analyst at independent research firm CreditSights Inc. in London, who will be logging on from his home office and will host a client call the next day. “We’ve had to blank out Sunday on the calendar.”