The head of the euro zone's bailout funds, Klaus Regling, said that he believes banks in Spain, Portugal, Cyprus, Greece and Ireland are in good shape and that there will not be any surprises in European Central Bank stress tests due later in 2014.

In an interview in today’s Sueddeutsche Zeitung newspaper, the head of the European Stability Mechanism (ESM) said the five countries were benefiting from rising exports and economic growth was returning. He said it was important that the reforms continue. “The banks in the programme countries are in quite good shape,” Regling is quoted as saying. “I expect that there won’t be any big surprises in Spain, Portugal and Cyprus. The same is the case for Greece and Ireland.”

The ECB’s asset quality review, an assessment of the balance sheets of more than 120 banks due to be completed next autumn, should bring transparency on the quality of banks’ loans and other assets. Bankers say that the latest checks on capital and stress tests of banks’ resilience to shocks must be rigorous, pointing to the 2011 tests that found no weaknesses among Spanish and Irish banks, even though the countries subsequently asked for bailouts of their banking sectors.

European Monetary Affairs Commissioner Olli Rehn has said that banks are already preparing for the results of the stress tests by raising capital on the market, with about €80 billion euros raised to strengthen banks over the past couple of years.

Reuters