27 Oct 2014
ECB's bank stress test largely as expected - Westpac
FXStreet (Bali) - The ECB comprehensive assessment of bank asset quality was largely as expected, notes Sean Callow, FX Strategist at Westpac.
Key Quotes
"Consistent with the Friday’s leaked report, the official release found 24 banks across the euro area in need of €24bn in capital under the 2016 adverse scenario. This finding was based on banks’ end-2013 balance sheet; since then, many banks have raised the capital necessary to see them pass the test. Post capital raising, the remaining shortfall is only €10bn across 14 banks. Of this figure, Greek banks are responsible for €3bn; their existing approved restructuring plan effectively removes their capital shortfall."
"That then leaves a net shortfall of €7bn, which is relatively minor. None of Europe’s largest banks failed the test; and no banks in Germany, France or Spain failed the test. All told, as expected, this is a positive result. However, it must be remembered that this outcome says next to nothing about these banks’ ability to increase lending to the region – which is what we need to see if growth is to strengthen."
Key Quotes
"Consistent with the Friday’s leaked report, the official release found 24 banks across the euro area in need of €24bn in capital under the 2016 adverse scenario. This finding was based on banks’ end-2013 balance sheet; since then, many banks have raised the capital necessary to see them pass the test. Post capital raising, the remaining shortfall is only €10bn across 14 banks. Of this figure, Greek banks are responsible for €3bn; their existing approved restructuring plan effectively removes their capital shortfall."
"That then leaves a net shortfall of €7bn, which is relatively minor. None of Europe’s largest banks failed the test; and no banks in Germany, France or Spain failed the test. All told, as expected, this is a positive result. However, it must be remembered that this outcome says next to nothing about these banks’ ability to increase lending to the region – which is what we need to see if growth is to strengthen."