'Banking EU stress test'
August 13, 2010 at 2:30 pm
Results from the European banking stress tests conducted by The Committee of European Banking Supervisors (CEBS) have revealed that seven out of 91 banks failed.
The banks that failed included five Spanish banks – Diada, Espiga, Banca Civica, Unnim and Cajasur plus Germany’s Hypo Real Estate and Greece’s ATEbank. But of the four UK banks that were tested, Barclays, HSBC, Lloyd’s TSB and The Royal Bank of Scotland, all passed.
According to the CEBS, the objective of the 2010 exercise was to provide policy information in order to access "the resilience of the EU banking system” in case of “adverse economic developments” and to look at its ability to absorb “shocks on credit and market risk”.
Testing was extended from 26 organisations in 2009, to 91 EU banking institutions in 2010. This was organised in descending order of size, covering “at least 50% of the national banking sector,” the CEBS explained.
The seven banks that failed the health checks would need to raise capital by 3.5bn Euros, in order to meet the required standards. These banks have been requested to put forward a plan to “address the weaknesses” that have been highlighted from the stress testing within an agreed period of time with their supervisors, said the CEBS.
Commenting on the tests, the European Central Bank (ECB), said that the stress testing was "comprehensive and rigorous". It welcomed the disclosures that were made by individual banks. This allowed the 91 banks that were tested the "public assessment of their capital position".
Results of the stress testing were based on “what if” situations, including believable but acute scenarios that were unlikely to occur. However, periodic and EU wide stress tests will continue to be undertaken by the CEBS across the banking sector, in order to improve practices throughout Europe, it said.
The CEBS, EU national supervisory authorities and the ECB worked in conjunction with each other to prepare and publish the results of the tests.
