Europe Does Not Need More Stress Tests: SocGen CEO
The European banking sector does not need another round of stress tests because the exposure of large banks to sovereign debt is already public, Société Générale Chairman and CEO Frédéric Oudéa told CNBC Tuesday.
"The exposure to sovereign debts is public. They are well known," Oudéa said. "Markets can make calculations and I think generally speaking, people totally overestimate the impact of any kind of scenario on this sovereign debt."
The 2010 stress tests put the balance sheets of major European banks through various economic scenarios to determine whether more capital was required. Only a small number of the banks tested were found to need capital, but since then the euro-zone debt crisis has continued to plague governments and undermine investor confidence.
Fears over contagion in the euro zone have lead many market watchers to call for another round of bank stress tests to allay fears and stabilize markets.
Even though Oudéa thinks more tests are not needed, he told CNBC that the region's debt crisis is still a major concern for 2011 and that it could bring further volatility to the markets.
"I have it in mind, it’s potentially still a volatile year on this issue," Oudéa said.
If European governments are able to come a solution, it could "make the volatility disappear," according to Oudéa.
"Before the markets are reassured, they will want to see … the results of the different decisions made by the governments. So that might require some time," he said.
No Euro Zone Break Up
Oudéa said that he sees no risk of a break up of the euro zone because of the shared political commitment to the common currency. He also said that fears of contagion from the euro zone debt crisis had been overblown.
Oudéa highlighted the fact that the problems facing Greece, Ireland, Portugal and Spain are different and he said that the problems were on the whole manageable.
When asked whether Europe needed stronger economic governance and convergence, Oudéa said it was a political choice that would have to be adapted to by businesses such as SocGen, but his personal preference was for more convergence.
"I say as a citizen, I would effectively recommend more convergence, more coordination for this euro zone," he said.
"It would make this euro zone easier to understand by markets and investors in the US or in Asia. The euro zone like it stands is a bit complex."
- Video: SocGen CEO on 2011 Strategy