The European Central Bank will publicly release the results of individual bank stress tests, a senior bank official told CNBC Wednesday.
Lorenzo Bini Smaghi, a member of the bank's executive board, said the results will be available within a couple weeks. Spain, which announced Wednesday that it would publish its results, will do so first.
The senior official acknowledged that the upcoming test results could expose unfavorable capital conditions for certain EU members.
"Either there will be a merger—and this is already planned in Spain—or there they will go to the markets—within a given deadline—or they will take on public capital...in some countries, like Spain, there is already some capital being put aside by the government in case the bank doesn't find it in the public markets," Bini Smaghi said. He added that "mounting market pressure" has pushed the ECB to pursue the new strategy.
In a separate interview with CNBC, Paul McCulley, managing director of bond giant PIMCO, called the development "profound."
Earlier Tuesday, European Central Bank Governing Council member Yves Mersch said publishing the results of euro zone stress tests could help repair the crisis of confidence in the euro zone banking system.
Presenting the Bank of Luxembourg's annual report, Mersch said a wider publication could help improve the crisis of confidence in the region although it was too early to say whether it would be done.
"In an environment where Europe has maybe less a problem of economic fundamentals than of confidence, transparency is an essential element," he added.
A day ahead of a European Union summit likely to focus on regulatory matters, Germany's finance ministry also announced that it was coordinating the issue with EU partners. Bankers said the two countries might jointly provide the impetus for action on a European scale.
"If Germany supports Spain in its push, the debate in the EU gets a special dynamic which makes publication more likely," said one European banking source.
A source from French President Nicolas Sarkozy's office said France would have no objection to publishing stress tests.
"France would have no difficulty, if there was a decision in favor of stress-testing, to join," the source said. "It does not have any difficulty in publishing the results of these stress tests...we have no particular concern in this matter."
Spain's banks have largely weathered the financial crisis but the capital of the country's 45 savings banks has been eroded by exposure to property and construction. Listed and savings banks have about 400 billion euros in property-related debts on their books.
"The stress tests are to prove that all banks have sufficient capital to cope with economic growth scenarios, which at present seem most reasonable, but also future complicated growth scenarios," Spanish Central Bank Governor Miguel Angel Fernandez Ordonez said in a speech.
source: cnbc.com
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