Outlook: So just what did the Financial Services Authority discover when it stress-tested British banks earlier this year? We don't know because the results have not been made public – nor will they be any time soon, after a freedom of information request made by the Bloomberg financial news agency was rejected by the Treasury.
The Government's explanation for rejecting the request was that disclosing the stress test results might cause "uncertainty" – either about the sector as a whole or individual banks. It is a curious answer because it is difficult to think of something more likely to create uncertainty than the Treasury telling the world there might be something in the stress tests to worry people, but it is not prepared to say what.
Surely, if you wanted to create certainty about the banking system, you would publish every last scrap of information you had about it – including details of the exact tests to which each bank was subjected and how they fared. After all, even if some banks came up short, they have presumably been told to remedy the problem sharpish, so full disclosure ought not to be a worry.
The Americans, after all, have not found it difficult to publish the details of how the Federal Reserve put the 22 largest US lenders through their paces. Some of those banks were ordered to raise new capital, which they are now doing. Confidence has not collapsed – quite the reverse, in fact, the market is continuing to mark up the sector.
Here, the conclusion one is bound to draw from the Treasury's omerta with the banks is that something fishy is going on. Maybe the tests were not particularly robust, or certain banks are being given too much latitude. That is the fear voiced by the Financial Crisis Advisory Group, a group of European Union financial regulators. Hans Hoogervorst, its co-chairman, says keeping stress test results secret – a practice that has occurred across Europe as well as in the UK – enables bankers and even finance ministers to put pressure on people like him to "fix the rules" so as to ensure banks get the right grades. Transparency is what is needed now, he adds.
Given that a good number of Treasury ministers have had their fingers burned during that other ongoing row over the disclosure of sensitive financial data, you can understand why there might be some nervousness at No 11 Downing Street about freedom of information requests. But if there is one lesson that they should have learned by now, it is that in the absence of full disclosure, people always assume the worst.Reuse content