Sunday, July 31, 2016

Europe’s banks through stress tests – now everything is good? – THE WORLD

Frankfurt / Main – material 12 000 Data bank, money per house a PDF with 20 pages. Once again, Europe’s banking supervisors have massively raised numbers to check the financial institutions on the continent to their resilience. Are they prepared for a slump in the economy?

Are the capital buffers of money houses when housing prices collapse? With such scenarios European banks were tested through its paces. Although banks are now in a better position according to statements of Supervisors as a few years ago, the suspicion was last big in the industry. And what about the Italian crisis banks? The results bring at least some clarity.

How did from the tests?

Unlike the last stress test, there was no on-site examination. The Institute had the scenarios through their internal systems to run and then fill in appropriate tables of Supervisors. was published then, how the banks under the various scenarios sections using the hard core capital ratio as mentioned. It is considered a crucial indicator. It sets bank capital in proportion to the risks incurred and provides information on the respective capital buffer against crises.

How many institutions rayed the overseer?

the European banking Authority has taken 51 institutes under the microscope, including 9 German. At the same time examined the European Central Bank (ECB) in a stripped version 56 more banks from the euro zone. was published only the EBA member.

What did the guards do?

was performed to determine whether the financial institutions have sufficient capital buffers to cope with an economic crash and collapse in property prices. The scenarios that have been played out on the basis of the figures for the end of 2015, saw massive economic shocks in Europe: For this year and next a shrinking by 1.2 percent and 1.3 percent economic, in 2018 only 0.7 percent growth , What was new was that legal risks are involved – about penalties, have to pay the banks. However, these as were not specifically published, but together with other published “operational risk”.

What is the result failed?

Overall, pretty neat. Thanks to massive recapitalizations of banks sector in Europe as a whole is quite stable, said the EBA. The nine German institutes in the test proved to be equipped to be sufficient, though in some cases only slightly. Particularly strong came under pressure, Commerzbank and the German bank, but they were still on the brands previously identified by analysts as critical. The weakest capital ratio showed in the test as expected the Italian bank Monte dei Paschi on. But you thought for a moment before the announcement of the stress test results before a rescue plan. Exciting could still be whether the largest Italian bank Unicredit reaches for a modest performance in the stress test to further capital measures.

What are the consequences for the banks? ‘ / p>

Unlike the stress test in 2014 there was no a priori by Faller. The guards gave up requirements of capital ratios, had to satisfy the banks. Instead, the results will be used in the regular review of business models and risks of institutions. The authorities put towards year fixed individual capital add-ons and also determine how much money should pay the banks for dividends or interest on equity-related bonds. Is the capital buffer is too small, the warden may prohibit such dividend distributions to shareholders.

Creates the test a new confidence in the stability of banks?

This remains to be seen. In the past, the reality frequently overtook the test scenarios. As a diagnostic tool, the last stress test was but been quite successful, says the chief executive of the Association of German Banks (BdB), Michael Kemmer. After only was omitted therapy. When stress test in 2014 fell by nine Italian banks. But then came a long time nothing to resolve their plight. Today, critics say again, have the stress test of limited significance on the stability of European banks. And about the consequences of the Proposed referendum on United Kingdom membership of the European Union-vote the British unrecognized the current test.

What criticism there this time?

It pushed many to evil that only the currently unrealistic scenario of rising interest rates was examined, but not the consequences of a further reduction in interest rates. But just suffer banks, for example, because they can hardly create even made profitable own deposits and their interest margin shrinks as loans extended. Some like the Bremen economist Rudolf Hickel suspected as fundamental conflicts of interest in the ECB. For if negative interest has been played out in the test, this could have been a slap in the face for the monetary policy of the Fed. “It was always a mistake to concentrate the double task of monetary policy and supervision of the ECB.”

Why two supervisors were involved in recent tests?

the ECB is responsible for banking supervision in the euro area since November 2014 and controls the 129 largest institutions directly. Of which take the current test but only 93 institutions participate. The other had been recently screened as the Greek financial institutions or subsidiaries. The EBA is the top Banking Authority of the European Union and therefore also responsible for banks in non-euro countries like Britain.

ECB Banking Supervision

the SSM

European Commission on banking union

EBA to stress test in 2014

ECB stress test in 2014

list of monitored by the ECB banks

EBA to stress test in 2016

message banking association to stress test

films Bankers Association for stress test

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