Banks Stress Tests

[timebandit]

Oh dear, stress tests to tough.

Germany's Helaba has ruled itself out of the stress test after complaining that the regulator's decision not to accept some of its hybrid capital made the difference between passing and failing, and two Spanish banks that will fail blamed the regulator for being too strict on the use of capital that can be included.

CASUALTIES

The EBA said its third pan-EU stress test of lenders since the financial crisis began will give more detail -- 3,000 data points compared with 100 last year.

The test has been criticised as being too mild, but investors said a bigger problem is that banks remain in denial about the need to recapitalise.

"The 'extend and pretend' policies of banks globally has failed to give bank managers the incentive to raise enough capital," said Neil Dwane, chief investment officer for Europe at RCM, a unit of Allianz Global Investors.

After steep share price falls, the cost of raising equity has soared and the ability to raise debt has collapsed, he noted.

Ten to 15 banks are likely to fail the test, euro zone sources told Reuters two weeks ago, with casualties expected in Spain, Greece, Germany and Portugal.

Six Spanish banks will fail, including five savings banks and a mid-sized bank, according to a local report. Spain is testing 21 banks, far more than any other, and is trying to restore confidence in the industry.

Most expectations are now for between five and 15 banks to fail, according to analysts polled by Reuters and other surveys. No large bank is expected to fall short.

Reuters link

[FIGGY]

The problem is they have already stated that they designed the test to have between 10-15 fails.

They did this so it looked like the test was robust but so that not too many fail and panic the market

[A.steve]

And now... front page Reuters... same subject... (more interesting - IMHO)

Europe's banks brace for clutch of health test failures

(Reuters) - A health check of European banks is expected to show that as many as 15 lenders need more capital to withstand a prolonged recession, with criticism growing that the tests do not encompass the impact of a Greek default.

Europe's bank "stress test," to be published at 5 p.m. British time, will make 90 lenders reveal for the first time their profit forecasts, a breakdown of their sovereign bond holdings and funding costs, and will force the weakest to recapitalise.

Nice timing to release the report, too...

Edited July 15, 2011 by A.steve

[interestrateripoff]

Irish banks pass European stress tests ‘comfortably’

Excellent news, clearly a robust test, the last time they passed they more or less immediately needed a bailout.

[Bloo Loo]

Irish banks pass European stress tests 'comfortably'

Excellent news, clearly a robust test, the last time they passed they more or less immediately needed a bailout.

what are they testing?...the strength of the doorman?, the toughness of their cheque paper, the colourfastness of the credit cards?

[timebandit]

Irish banks pass European stress tests ‘comfortably’

Excellent news, clearly a robust test, the last time they passed they more or less immediately needed a bailout.

Amazing really, I expected to see at least one Irish bank. Nice of them to wait until the markets close before the official release.

[Deckard]

As expected...

Eight Banks Fail Stress Test With $3.5 Billion Capital Shortfall

More details here

Spain, whose economy and banking system are reeling from a collapsed real-estate market, is home to the largest number of failures, with five banks dipping beneath the 5% threshold, the EBA said. Another seven Spanish lenders barely passed, with capital ratios between 5% and 6%.

Two Greek banks and one Austrian bank also failed the tests, the EBA said. In addition to Spain, the countries with banks that nearly failed are Cyprus (one bank), Germany (two), Greece (two), Italy (one), Portugal (two) and Slovenia (one).

In Ireland, which had to accept an international rescue last fall after its banking system imploded, all three of the tested banks easily passed the tests.

Bravo, bonuses all round

Edited July 15, 2011 by Deckard

[Son of Fred]

The news came just as Italy's parliament approved a 70bn euro austerity package. The country's central bank said that all Italian banks had passed the tests with "an ample margin".

That's a relief. No cause for concern there either then.

[interestrateripoff]

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8641514/European-stress-tests-banks-set-for-chaos-Monday-after-nine-fail.html

The nine banks that failed the European Banking Authority's (EBA) stress tests will have to raise just €2.5bn (£2.2bn) between them to meet their capital shortfall.

City analysts and investors said the criteria used by the EBA were overly optimistic and failed to capture the severity of the current sovereign debt crisis sweeping across the eurozone.

"If the European Union could monetise the value of the credibility it has destroyed it would be richest organisation on Earth," said one major credit manager.

Monday looks like it will be fun.

[okaycuckoo]

http://www.telegraph...-nine-fail.html

Monday looks like it will be fun.

"If the European Union could monetise the value of the credibility it has destroyed it would be richest organisation on Earth," said one major credit manager."

HEHEHE!

[Ash4781]

http://thescotsman.scotsman.com/scotland/Scotland39s-two-major-banks-given.6802347.jp

SCOTLAND'S two major banks have both passed crucial European "stress tests" of their balance sheets.

Royal Bank of Scotland and the Lloyds Group, which owns Bank of Scotland, say it shows they have "robust" cash reserves. Both were bailed out during the financial crisis.

backslapping, and waving of the Scottish flag.

We did it guys!

Edited July 16, 2011 by Ash4781

[timebandit]

Unexpected

July 17, 2011 10:04 pm

Spain and Italy top results in stress tests

By Patrick Jenkins and Brooke Masters in London and Quentin Peel in Berlin

Spain and Italy’s leading banks were the strongest performers in last week’s European stress tests, in a surprise result that could help relieve the funding pressure that had been building on them.

The European Banking Authority, which conducted the exercise, found an aggregate capital shortfall of only €2.5bn ($3.5bn) at eight banks, prompting criticism that the tests were not tough enough, in part because they did not account for any sovereign failure even as Greece teeters on the brink of default.

FT link

[beccles]

None of the 'stress tests' included a Greek default.

^^ like he says.

Edited July 17, 2011 by beccles

[blobloblob]

First round of stress tests:

Regulator: Are you safe?

Bank: Yes

Second round of stress tests:

Regulator: Are you safe?

Bank: Yes

Regulator: Really?

Bank: Yes

I pity the shareholders of the 8 banks who answered the last question 'No'.

[FIGGY]

killer fact from the stress test:

Most dramatically of all, the tests examine a doomsday scenario under which UK house prices plummet almost 25% over the next two years.

Despite all of this, all the big British banks were fine, unsurprisingly, given that they are now among the strongest in Europe.

So we can crack on with the HPC then