EVE OF STRESS TEST: IMF PILES IN WITH NEW WARNING

The IMF issued a stark warning to the Eurobanks last night: the markets don’t believe you – more transparency required.

This confirms qualitative feedback the Slog has been getting throughout July; and the credibility hasn’t been aided by the widely-reported spectacle of banks scurrying around to try and bend rules or change critieria and definitions.

Said the IMF:

“The implementation is as yet patchy….To reduce aggregate uncertainty and induce a greater willingness to tackle troubled banks, [IMF] staff call for a more detailed disclosure of inputs and outcomes, possibly at the institution level….[otherwise]….some uncertainty regarding the stringency of the tests is likely to remain…”

We understand that for the Franco-German banks in particular, heavy negotiations continue about how sovereign debt would be written down or off. This is a bit like asking, before a Cup Final, whether one might change the offside rule.

The test results are due out tomorrow, and are expected to evoke widespread scepticismin the markets and among dealers.

Related stories: Eurobanks still playing for time