News - 26 July 2010
Banks gain on the Stockholm stocks exchange after Friday's verdict – but the exams might not be tough enough to restore confidence.
Europe's main stock markets rose at the start of trading on Monday, as investors gave their first response to the pre-weekend release of "stress tests" on the European banking sector.
In Stockholm all four major banks rose in morning trading, with the country's fourth biggest bank Swedbank taking the lead with a 1.50 percent increase. SEB and Handelsbanken were up 1 percent and Nordea gained 0.40 percent.
Although the Swedish banks were expected to pass the test, Europe sighed with relief Saturday after all but a handful of the continent's banks passed financial stress tests.
Still, analysts warned that the exams might not be tough enough to restore confidence in the sector.
"It seems the tests may have raised more questions than they have answered and in the coming weeks it will be the interbank lending markets that will have the real answer as to whether real confidence has returned to the European banks", said Mark O'Sullivan, director of dealing at foreign exchange firm Currencies Direct.
"What seems to have occurred is a compromise amongst European banking regulators, with many questioning if the bar had been set way too low in testing the European banking sector", he added.
Unicredit chief economist Marco Annunziata said that the results showed that "the bulk of the eurozone banking system is sound, but there are serious questions on whether the tests can be considered sufficiently stringent."
Although the tests were "a first step towards improved transparency," he said that they were "insufficient to bring about the rapid and major improvement in confidence in the European banking system which should have been the main goal of the exercise."