HSBC Chairman Green: EU Stress Tests Could Help Confidence

6th Jul 2010 14:32

By Margot Patrick Of DOW JONES NEWSWIRES LONDON (Dow Jones)--HSBC Holdings PLC (HBC) Chairman Stephen Green on Tuesday said he supports the European Union's current stress tests of the region's top 100-plus banks, and that such tests are an important measure to help maintain the stability of the financial system. Speaking to Dow Jones Newswires on the sidelines of an investment management event where he spoke, Green said the tests had already proved to be important in restoring investor confidence in other countries, such as the U.S. and Sweden, and that the EU effort might have a similar effect. The EU is due to publish results of the stress tests July 23, with a bank-by-bank breakdown. While major and well-capitalized banks such as HSBC are expected to pass with flying colors, there are concerns that the tests will highlight weaknesses at some smaller banks and force them to seek more capital from investors or their governments. Speaking more broadly on global financial reform, Green told attendees at the event that he also supports the Basel Committee on Banking Supervision's Basel 3 proposals, which will require banks to hold "much-more demanding levels of liquidity," and prefers them as a way to curb banks' risk-taking compared with the so-called Volcker rule in the U.S. that would limit banks' proprietary trading and investments in private equity and hedge funds. Green said it is too difficult to segregate proprietary activities from legitimate client business, and that raising capital levels is a better way around the issue. After attending a summit of business leaders at the Group of 20 countries' meeting in Toronto 10 days ago, Green said there was a strong agreement among executives and finance ministers that the bulk of financial sector reforms should be agreed by the end of the year. -By Margot Patrick, Dow Jones Newswires; +44 (0)20 7842 9451; [email protected] (END) Dow Jones Newswires July 06, 2010 09:32 ET (13:32 GMT)