Stephen Pope Comments: Cantor Fitzgerald: Euro stress Tests Are Too Soft

July 8, 2010, Corporate FX

The stress tests being carried out on 91 European financial institutions are too soft, according to Cantor Fitzgerald.

Stephen Pope, the London-based chief global equity strategist at the investment group, made his comments to Bloomberg after the news site revealed that the tests will assume a 17 per cent drop in Greek bonds and a three per cent fall in Spanish bonds.

If this is the limit of the stringency test, Mr Pope said, the regulators appear to be pursuing the "softest option possible".

"If that is the indicator how stringent the stress tests will be, then they aren't worth too much," he added.

The tests are being carried out by the Committee of European Banking Supervisors and will cover 65 per cent of the European banking sector.

Regulators have called for the tests in a bid to restore confidence in the European banking sector after Greece's debt crisis sent bond yields soaring and the euro plummeting in foreign exchange trading.