Market information

Friday, July 23, 2010

This afternoon, after the close of the markets, the results of stress tests in which 91 European banks participated are published by the European Banking Committee of Supervisors. The results include the effects of two stress scenarios that the banks have analyzed. There is disagreement on the usefulness of the transparency regarding these stress tests. On the one hand, transparency is needed on the risk profile of banks, but on the other hand, the openness of these figures may lead to reduced confidence in the financial sector. ING Financial Markets states that a possible consequence of a relatively poor outcome of banks from a particular country is that credit spread to be paid on the government bonds from that country will increase drastically.

The coverage ratio of large pension funds in the Netherlands is still below the minimum required coverage ratio by the dutch central bank of 105%. The nominal coverage rates for pension funds for the metal sector, PME and PMT, are respectively 91% and 93% at the end of June. The returns on assets are not disappointing, but the persistence of low interest rates causes the value of the liabilities to remain high. The other big pension funds in Netherlands, Zorg en Welzijn (healthcare) and ABP (government) have not reached the required level either with coverage ratios of 99% and 95%.

The 6M Euribor remains at 1.13%. The 10Y swap increased 5 basis points to 2.91%.

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