We must be open about our banking problems

George Osborne has called for the EU to put transparency “at the heart” of its response to the banking crisis.

The Shadow Chancellor stressed Europe’s priority should be “a co-ordinated response to the danger poised by so-called ‘zombie’ banks”.

And he highlighted the success of the stress tests carried out on banks in America:

“By reducing uncertainty about the quality of banks’ balance sheets, the US stress tests have helped to bring some confidence back to the markets there, though risks remain. Crucially they have helped US banks to raise capital from private sources.”

Writing in the Financial Times, George said the EU-wide stress tests being conducted by the Committee of European Banking Supervisors should follow the US and make the relevant information public to rebuild confidence.

He criticised the decision to turn down a Freedom of Information request for the results of stress tests carried out on UK banks, arguing that publicising the information would reduce uncertainty in the financial markets.

And he stressed that transparency should also apply to taxpayer support for the banks, as the public “have a right to know what assets we are insuring”:

“This is the right European response to the financial crisis. The alternative is a European economy burdened with zombie banks and ill-considered regulation that could act as a drag on growth for years to come.”