Corporate treasurers don't believe bank stress tests.

Stress testing of European banks has failed to quell concerns among European companies as to the health of European banks, says a report in the Financial Times.

According to the newspaper article, UK and European companies with revenues in excess of USD 240 billion are increasingly "shunning" banks from Spain, Italy and Germany, saying the stress tests had raised more questions than answers. One treasurer was quoted as saying that "the stress tests were a joke".

In the wake of the financial crisis, corporate treasurers are faced with the prospect that their main relationship banks are rated lower than them, however, credit ratings are no longer a reliable source of information when it comes to assessing the counterparty risk of banks. Corporate treasurers are also starting to look at CDS spreads and share prices of banks to try and assess their creditworthiness.

Assessing the creditworthiness of banks is also difficult for those treasurers looking to source banks in markets such as China, where there is not the same degree of transparency regarding banks' balance sheets. So while Chinese banks such as ICBC have passed some of the larger US banks in terms of market capitalisation, treasurers find it difficult to accurately assess the creditworthiness of China's four largest banks.

Look out for the Q3 10th anniversary edition of financial-i which features interviews with Dennis Tosh of Ford Motor Company, and Anita Prasad of Microsoft Treasury talking about how they are managing counterparty risk in the wake of the financial crisis. To ensure you get your 10th anniversary issue subscribe here.

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