Seven banks fail European stress tests
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Seven European banks have failed the stress tests designed to examine their durability in a financial crisis.
The Committee of European Banking Supervisors failed five Spanish banks - Diada, Espiga, Bianca Civica, Unnim and Cajasur, one German - Hypo Real Estate and one Greek - ATEBank, out of 91 tested.
The Royal Bank of Scotland, Lloyds, Barclays and HSBC were the only British banks involved and all passed.
The Financial Services Authority predicted that all UK banks would get through the tests.
It adds: “The CEBS exercise shows that the UK banks are well placed to handle further periods of economic stress, as outlined in the macro economic parameters detailed by CEBS, should such stress develop.
“The purpose of a stress test is to understand the extent to which banks are prepared, should the economic environment take a turn for the worse. It is not a prediction of what will happen or what banks’ results will actually be and the CEBS stress test does not take into account actions a bank might take in response to deteriorating economic conditions. It would be misleading therefore to treat the results of the stress test as a forecast either by the FSA or the individual banks.”
The stress tests checked the credit risk by simulating the profit and losses in two sets of macro-economic scenarios - benchmark and adverse.
The benchmark scenario was based on the EU Commission Autumn 2009 forecast and the European Commission Interim Forecast in February 2010, adapted to reflect current conditions.
The adverse macro-economic scenario was based on European Central Bank estimates.
A “sovereign risk shock” was simulated plus GDP, unemployment and in tersest rates for each EU member state, the US, and the rest of the world collectively.
The British Bankers’ Association says: “UK banks have already put in the work to rebuild their businesses and put more money aside against future financial problems. It is no surprise to find they have exceeded the standards set out by CEBS to ensure banks across Europe are well placed to weather any future financial problems.”
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Readers' comments (1)
Anonymous | 26 Jul 2010 2:34 pm
Sad to see the 'get on with it rant aimed at fellow industry professionals'. Opinions are to be courted, encouraged and debate is good. Perhaps this individual is very happy with the current state of play, or has given up, hence the bitter response. Either way, under whatever guise the regulator carries on, there are many questions to ask and all of our opinions, assuming we aim it via various bodies are valid. Perhaps those who wish to tell others to get on with it should do the same with nothing constructive to say or ask, or show true metal and actively engage in the debate!
Have a good day now!!
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