The US regulator’s stress test of banks, designed to gauge which companies from the troubled sector could survive an extremely negative economic environment, is due to be released Friday.
If a bank was signalled out by the government as not having sufficient capital to weather tough times it could have serious implications. One expert told CNBC that the authorities may shy away from naming names, but that doesn’t mean that all the banks have passed.
Bank Transparency Needed
“It’s very, very important that they share the information with the public. If they don’t it will not instil the confidence we need,” Christoffer Moltke-Leth, Asia Pacific head of sales trading at Saxo Capital Markets, told CNBC.
There could be a negative impact on any bank mentioned in the stress test has not having sufficient capital, with customers fleeing for fear of default, Moltke-Leth added.
Moltke-Leth thinks that the economny is currently only mid-way through the recession and warned CNBC that there was more bad news to come.
Banks Need More Capital
“The US Treasury will come out with a very opaque statement saying that all banks have passed, but then there may well be in the months to come statements saying various banks need additional capital to get their leverage ratios down and to improve their tier one capital,” Robert Parker, vice chairman from Credit Suisse Asset Management, told CNBC.
“You just cannot make a statement saying a bank has failed a stress test because then you’re going to result in an immediate collapse of confidence in that bank,” Parker said.
Banks Haven't Been Deliberately Lying
The banks have not been deliberately lying about the extent of their losses. What they have demonstrated each quarter is that they didn't know about the assets that were at risk, Roger Nightingale from Pointon York said.
What Will the Banks Stress Tests Reveal?
"The US government has an extraordinarily difficult communication challenge here," Chris Osborne from FTI Consulting said of the stress tests.
US Bond Yields May Have Bottomed
We have probably seen the lows in U.S. bond yields, believes Sean Darby, head of regional strategy at Nomura International. He makes his case to CNBC.
Commercial Property — Next Shoe to Drop?
The commercial property market may be one of the next big drags on the U.S. economy, and could be worse than what Wall Street expects, Jim Awad, MD at Zephyr Management told CNBC.
Europe's 'Long Slog' to Recovery
The UK and Europe should start to see an export-led recovery, but it's "going to be a long slog," Amit Kara from UBS told CNBC.
Another Economic Fall to Come?
"We've fallen off a cliff and we've landed on a ledge halfway down," Stephen King from HSBC told CNBC when describing the state of the global economy.