Stress Testing. What solvency is and what looks like.

Dear SAP Banking Community members.

As you probably know, the financial markets are on turmoil, and the risk spreads on some European countries/financial corporations have increased dramatically on the last weeks.

The European Union is trying to reduce the liquidity tensions by making public the results of the Solvency stress tests that have been kept far from the eyes of many investors until now.

Let me recommend you to read the following article in the Financial Times.
http://www.ft.com/cms/s/0/02204ca8-79a7-11df-85be-00144feabdc0.html

It literally says.
“The European Central Bank believes greater transparency in member states' banks would help to assuage investors' fears and has been exerting intense pressure behind the scenes”

And also.
“There is nothing more damaging than rumors, suspicion, doubts and uncertainty. What’s best for markets, operators and investors, is the reality of numbers, figures, percentages as long as they are accurate and honest.”

On the last posts, I commented that we’re moving towards a knowledge based economy driven by efficiency, and this is a good example.

What I read here is that the market does not trust on the capacity of some Banks/Countries/Corporations of paying back the resources that investors are lending them, so they ask for a higher premium.

By the way, that’s a definition of solvency, the main resource for the Financial System.

And what is the resource proposed for the European Central Bank for substituting the lack of Solvency? They call it transparency but in fact what they’re describing is Information and Knowledge.

Of course, we’re at the very beginning of the systemic change; this is just a very small first step…

Some days ago I had a very interesting conversation with a former manager about perspectives of growth for the SAP Banking market, as she has business development responsibilities on the area.

I think this is a good example, but we’ll talk about it in more detail another week.

Kindest Regards.

Ferran.