Several European banks fail 'stress test'

27 October 2014

bank_sign A 'stress test' of banks' finances has been failed by 24 European banks, the European Banking Authority has announced.

Fortunately none of them are UK banks. PHEW.

The 24 banks now have nine months to get their act together or face being shut down. The review was based on the banks' financial health at the end of 2013.

Ten have already taken steps to bolster their balance sheets in the meantime. All the remaining 14 banks are in the eurozone. The health check was carried out on 123 EU banks by the EBA to determine whether they could handle another financial crisis.

The list of 14 includes four Italian banks, two Greek banks, two Belgian banks and two Slovenian banks.

The worst offender was Italian bank Monte dei Paschi, which showed a capital shortfall of €2.1bn. Bloody Nora. Admittedly banks are in a better place than they were in 2011, when the last stress test was taken. Although various analysts question the validity of these tests as they failed to spot the collapses in Ireland and Belgian bank Dexia.

But now that's all changed, as the profits that banks are allowed to make through a future financial crisis are capped. Net income is slashed by 20% and there is greater transparency around how the data is used, giving more certainty to investors.

Also, the introduction of the Asset Quality Review looks at banks' loans and their governments debts, which has lead to a more sturdy assessment.

The banks that still need to raise capital:

Austria: Oesterreichische Volksbanken
Belgium: AXA Bank Europe, Dexia
Cyprus: Hellenic Bank Public Company
Greece: Eurobank Ergasias, National Bank of Greece
Republic of Ireland: Permanent TSB
Italy: Banca Carige, Monte dei Paschi, Banca Popolare di Milano, Banca Popolare di Vicenza
Portugal: Banco Comercial Portugues
Slovenia: Nova Kreditna Banka Maribor, Nova Ljubljanska Banka

TOPICS:   Banking   Debt

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