G8 finance ministers avoid mention of bank stress tests

By Anna Willard

LECCE, Italy (Reuters) - Group of Eight finance ministers avoided a reference to bank stress tests in an initial draft of their meeting communique on Saturday despite calls for Europe to follow North America's lead and publish test results.

The issue was one of the more controversial subjects going into Saturday's meeting in southern Italy and officials said deputies preparing the communique debated the issue late into the night.

But officials said Europe resisted demands from Canada and the United States to commit to publishing results of the tests, aimed at verifying how ready a bank is to resist major shocks, saying they needed first to reach agreement amongst themselves.

"It's this whole debate now that we're having at the moment, and we're not going to reach a decision tomorrow (Saturday) on it," Lagarde told a briefing at a meeting of finance ministers of the Group of Eight countries.

"That's what we're going to explain nicely to the Americans."

Results of "stress tests" have already been published in the United States and Canada -- a step seen as giving greater clarity to investors on the extent of underfunding at banks.

But Europe's leading powers are divided on publishing results of tests that vary and are run by different regulators and processes.

"There is more to be done in Europe (on stress testing), they should publish at least their systemic results," Canadian Finance Minister Jim Flaherty said on Friday.

Lagarde said European countries were discussing how and what to publish about their banks' resilience.

"We are debating it currently among Europeans to see if it would be by country, if we do it all at the same moment, if we publish only the criteria, if we do the criteria and the results," she said.

European leaders will meet in Brussels on June 18-19 an official said this the discussion on the subject was likely to continue there.

Tests have been carried out by individual countries in the European Union but results have not been published. And there are no plans to reveal results of a broader test by regulators now underway in the bloc which should be ready in September.

German Finance Minister Peer Steinbrueck is in principle in favor of stress tests for the European banking system, but he is opposed to making the results public.

"The European position is yes, but no publishing of individual reports for banks," he said on Saturday.

Lagarde, who has said she is in favor of publishing the tests, favors a coordinated approach.