“Cascading default, bank runs and catastrophic risk” lie ahead for the world economy unless Europe resolves its festering debt crisis, Timothy F. Geithner told global finance chiefs on the morning of Sept. 24.
European stress tests are likely to be “underwhelming” because they may require banks to raise less than half the 75 billion euros ($97 billion) of fresh capital needed, according to Nomura Holdings Inc. analysts.
The European Central Bank’s willingness to let lenders fail will depend on the funds available to wind them down, analysts said, after the new head of banking supervision said some should go out of business.
BNP Paribas SA, France’s largest bank, rose as much as 5.2 percent to a four-month high in Paris trading as European Central Bank President Mario Draghi’s push to set up a bond-buying plan eased concern over the sovereign- debt crisis.
Most publicly traded European Union banks have surplus capital and should easily meet the minimum requirements to be set by the Basel Committee on Banking Supervision, according to analysts at Nomura Holdings Inc.