The results presented on Friday the tests of 51 major European banks by the European Banking Authority (EBA) and the European Central Bank (ECB) show a total of the industry in a better shape than when last stress test two years ago. Nevertheless, banks remain called upon to increase their profitability to improve their equity base and to optimize their business models in a difficult environment. The only bank that in the test very bad abschlossen is, as expected, the Italian Banca Monte dei Paschi, located for years in trouble.
Author: Gerald Brown Berger, editor-in business, responsible for the financial market.
Shortly before the release of the stress test at 22 o’clock the Italian bank published elements of a rescue plan, which provides for a capital increase of 5 billion euros and the sale of bad loans on nearly 10 billion euros. New provisions for the capital shares are to be acquired by an international banking syndicate and sold. Should open the plan, the bank would not need a capital injection by the Italian State, of which it had given in the past few weeks very controversial discussions. As heard from financial circles, the ECB has approved the rescue plan of the Bank of Siena.
In the stress test was all about cutting the banks assuming two economic scenarios in the coming years, but not a formal pass or fail , According to the EBA, the core capital ratio of 51 audited banks has improved significantly in recent years and reached 13.2 percent last year on average. Assuming an unfavorable economic development in the coming years, the average rate would average 9.4 percent in the year 2018th “The results of the tests show that banks have improved their resilience in the euro area,” the ECB said. Only one bank, Monte dei Paschi, would be less than the critical value of 5.5 percent, and even lose their entire equity in a crisis.
German bank may establish by test
Below average cut off the German Bank and Commerzbank, fell behind the hard capital ratios in difficult economic scenario in 2018 to 7.8 and 7.4 percent, but would thus are still higher than the critical value of 5.5 percent. “We perform better in this Test starting as the test two years ago, although this year’s test demanding was,” said the CEO of Deutsche Bank, John Cryan.
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In a message to employees Cryan wrote:” We can do more. Our environment is challenging and can be even more challenging in the coming months. The results of the stress tests show that we are well equipped for hard times. In OTC equity trading in New York, the share price of Deutsche Bank rose 1.5 percent after the release of the test
“The Commerzbank is resistant and stress-resistant, “says Chief risk Officer Marcus Chromik. “Even under the adverse conditions of the EBA stress scenarios the stability of the Bank would be guaranteed. The low-risk balance sheet and good capital ratio of Commerzbank are proof.” Nevertheless probably many observers did not expect that Commerzbank poorly than the German bank. The CEO of Deka-Bank, Michael Rüdiger, sees his house with a capital ratio of 9.5 percent is well equipped in the poor economic scenario. Disadvantaged
German and Italian banks?
The results the revised German banks a total commented Bundesbank President Jens Weidmann: “the German banks have strengthened their capital base in recent years, while specifically reduced risk positions the resilience of the German banks has increased significantly the stress test shows that the German banks are equipped.. to withstand these severe shocks. Nevertheless, it is important that the banks, in view of the impact on earnings of the low interest rate environment, review their business models continuously, use opportunities for consolidations and cost reductions and face a changing competitive environment. “
the stress tests are controversial among experts, because in them is not the consequences of possibly years of negative interest rates are tested, among other things. The German economy Isabel Schnabel wrote on Friday night on the message service Twitter, neither the politicians nor the supervisors in Europe wanted tougher capital guidelines. It is therefore not surprising that the stress test on the basis of the existing Capital Requirements Directives show a greater resilience of banks in a crisis. Other critics believe that the design of tests German universal banks at a disadvantage not only to German Landesbanken, but also to Italian banks.
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