Stress tests needed at Euro banks: OECD

(BRUSSELS) - Fears that damage done by the financial crisis to balance sheets at European banks could be worse than official European estimates resurfaced in a new international report released on Monday.

"In many EU countries, uncertainties remain regarding the extent of the impaired assets problems on banks' balance sheets," said the Organisation for Economic Co-operation and Development in a report on the European Union economy.

"Concerns persist that banks may be insufficiently capitalised to deal with a further deterioration in economic conditions," it underlined.

The Paris-based grouping of 30 industrialised economies highlighted accounting differences between different estimates of balance-sheet problems.

It said International Monetary Fund figures put potential write-downs for continental European banks at up to 1.1 trillion dollars (750 billion euros) whereas European Central Bank figures for euro area banks suggested losses of around 650 billion dollars.

"This ongoing uncertainty calls for further action: systematic, rigorous and transparent stress tests are necessary to clarify the capital needs of individual European banks," the report's authors underlined.

The results of data collected from 22 European banks -- representing over 60 percent of all banking assets held within the EU, according to one official -- will be debated, but not published, in Gothenburg, Sweden next week at an informal gathering of EU finance ministers.

"Failure to deal with banks' balance sheet problems adequately could inhibit the functioning of the financial system as well overall economic growth, for some time," the OECD added.

Elsewhere, the report called on Brussels to "resist the rise in protectionist sentiment," saying "thresholds for domestic (EU) content" should be lowered.

Within the EU, there are already growing fears that national protectionist sentiment could undermine the single market.

The OECD also notably warned that competition in financial services, energy markets and network industries needed opening up.

Network industries include telecommunications, IT and service operations in the banking, legal, and airlines industries amongst many others.