The majority of European banks passed a round of "stress tests"
aimed to measure their financial system's durability against
economic disasters. But some wonder whether the results would ease
the minds of Europe exchange traded fund (
) investors who are worried about the stability of the whole euro
Only seven of Europe's 91 largest banks needed more capital to
withstand any declines in economic growth or deterioration in
sovereign debt issued by Greece, Portugal and Spain,
reports Jack Ewing for
The New York Times
Europe ETFs Surge as Economy Shows Life.
Still, some economists point out that the tests excluded
possible circumstances, such as the possibility of Greece or
eurozone country defaulting
. European policy makers responded by stating that they would never
allow a country to default. [
10 Steps to An International ETF Portfolio.
Bank regulators and Central Bankers assert that the tests were
rigorous and fears about Europe's finances were overblown.
Now that those tests are done, what next? Banks are continuing
with tight lending standards for both homes and businesses. This
could keep growth in these banks modest as long as tight standards
remain in place, but the standards could also help reduce risk.
Despite the higher standards, loans grew at the fastest pace in 20
years last month,
reports Jana Randow for Bloomberg
), Societe Generale SA (NYSE:
) and Deutsche Bank AG (NYSE:
) experienced large gains as the banks posted better-than-expected
profits and regulators softened rules on capital,
writes Fabio Benedetti for Bloomberg
Clearly, not everyone buys that all is well in the European
economy and there are some risks in the market that remain. If
you're not comfortable with those risks, you have two options:
there are international financial ETFs with lower exposure to
European banks and you can also utilize a trend following strategy
if you choose to hold an ETF with greater exposure to help you
manage your risk. [
How to Follow Trends.
For more information on Europe, visit our
. You can find various degrees of European bank exposure in these
ETFs; you can research country allocations in the
to see how it all breaks down:
iShares MSCI Europe Financials Sector (NYSEArca:
iShares S&P Global Financial (NYSEArca:
Europe is 25%
SPDR S&P International Financial Sector ETF
Europe is 52.5%
Max Chen contributed to this article.