Banks stress test puts Europe weaknesses openly mercilessly – THE WORLD

The expense in advance of this year’s European bank stress tests was immense. For months had worked (ECB) about 200 supervisory experts on the design and evaluation of crisis models solely with the European Central Bank, at the end were for each of the 51 banks tested before approximately 12,000 individual data. But just when their own resilience just problems: As the London-based regulators of the European Banking Authority EBA presented its highly anticipated report to 22 clock online, the server kept the onslaught obviously briefly not stand

the results, which were a few minutes late but finally available, draw a mixed picture of the European banking sector. With two exceptions – the Italian crisis bank Monte dei Paschi and the Irish Allied Irish Bank – indeed survived the simulated test in crisis scenario all institutions. Say enough core capital left to inferior risks in their business model and to stay even in the stress scenario still above the central bar of 5.5 percent. But eight years after the outbreak of the global financial crisis, the European banking system is as far from robust. Germany is no exception. Just the two largest houses are in the test of the ten weakest candidate

In other words: a new financial crisis would the German difficulties Bank and Commerzbank meet. In stress scenario of Supervisors, which simulates a three-year-long economic crisis, took Commerzbank with a hard core capital ratio of 7.4 percent only place 44. The German Bank, the International Monetary Fund recently because of their systemic importance and interconnectedness as “dangerous Bank of world dubs, managed with 7.8 percent just two places further forward.

“more resistant than two years ago”

Both institutions stressed nevertheless return post their own stability. “We are in 2016 with a better result from the test came out as 2014, although this year’s test was more challenging,” said John Cryan, CEO of the Deutsche Bank. the stress test show that the Bank is well equipped for even tougher times. “Commerzbank is durable and resistant to stress,” said Marcus Chromik, risk Officer of Commerzbank. “even under the adverse conditions of the EBA adverse scenario would be the stability of the bank guarantees.”

and the overseer expressed satisfaction. “The banking sector is now more resilient and can better absorb economic shocks than two years ago,” said the top ECB bank supervisor Danièle Nouy.

top ten banks in Europe in the stress test

However, just because doubts remain. Although the crisis simulation was significantly harder designed according to the sensitivity of the industry than the previous model: including legal risks were first detected, which may result from the misconduct of an employee. But unlike the previous stress test this time there was no prescribed capital ratio, which had reached the banks at least to exist. In addition, significantly fewer institutions were tested as two years ago.

Even the capital ratios shown do not allow for easy interpretation, because the overseer the various basic and have defined stress scenarios for each country and for each institution individually. Germany and its banks have in fighting, for example, with a significantly smaller decline in economic growth as Ireland. This is the reality, although closer than a uniform requirement, but difficult to compare. Other violations that make the banks quite create – from the uncertainty about the Proposed referendum on United Kingdom membership of the European Union Great Brit Annies to the occupation that began two years minus ECB interest rate policy – not play a role in the stress test. And the problem banks in Greece and Portugal, which like those of Italy suffer greatly under the legacy of bad loans, come in stress test for lack of size not even before.

scenarios to design?

is correspondingly great criticism. “EBA and ECB stress after the announcement of the stress test results, the resilience of European banks. Since very specific scenarios were tested, which have hidden key risk factors such as low interest rates, this statement is too far-reaching,” said Bonner economy Isabel Schnabel of “world” , Direct regulatory effects have not the stress test. To stay transparent manner, and whether the results would translate into regulatory capital requirements. “I think this is unlikely, because the guards – have repeatedly stressed that they consider capitalized sufficiently for the banks, making the stress test to a toothless tiger – as well as the policy..” The question is now how the markets would react. “Their pressure could outpace the overseer.”

In fact, it has Europe, crisis-proof, unlike the United States, failed in recent years, the Institute to make. The stress test would have the opportunity to change anything. How shaky the foundation is still, shows a recent study by the Mannheim Centre for European Economic Research (ZEW). In it, the researchers have their own stress test scenario played out with a stock market crash by 40 percent within six months. If there were such a financial crisis, could be expected in the European banks with deficits of up to 882 billion euros, the authors <"prefix_1" h2 class => warn and call for comprehensive measures to recapitalize, also in Germany.

is still much to do

Stutzig makes that do the supposedly solid European banks remains difficult, sufficiently make loans to the economy and inflation again bring in momentum. Although credit growth has recently risen. Judging by the ample liquidity in the euro zone, it is still far short of what one would expect from a weatherproof banking system.

Not to mention the case of Italy. Their third largest institution and oldest bank in the world, Monte dei Paschi di Siena, cut the stress test the worst. The capital base of the bank fell in Test 1451 bps, the equity ratio was erased as it were. The Institute succeeded just before gate closure to put together a multibillion dollar rescue package that was approved by the ECB before the publication of the stress test.

“We recognize well that there has been a capital raising to a great extent, “summed EBA head Andrea Enria shortly after the results of stress tests. Nevertheless, one can not exhibit in any case with a certificate: there is still work to do.

At least in this point should the overseer reap no contradiction.