How many banks will fail the European stress test?

[jpatter666]

For the fun of it, let's take an informal poll. Currently, the rumor is only one (Germany's Hypo). I think three (3). Probably one Greek, one Spanish as well.

[aaron]

Re: How many banks will fail the European stress test?

It will be greater than or equal to the number of U.S. banks that failed their "stress" test.

[Ben]

Re: How many banks will fail the European stress test?

I've been told it's nine

[chr5648]

Re: How many banks will fail the European stress test?

None, the ecb and eu elite would not allow such a thing to happen, the stress test is nothing more than a nice little marketing/psychology event to convince the public they have power. They even created a deadline on a friday to make it 'suspenseful' and get all the suckers to get all worked up.

[Chomsky]

Re: How many banks will fail the European stress test?

For the fun of it, let's take an informal poll. Currently, the rumor is only one (Germany's Hypo). I think three (3). Probably one Greek, one Spanish as well.

Seven!

LONDON – Seven of 91 European banks have failed stress tests aimed at measuring their strength in case the continent's government debt crisis worsens sharply.

The Committee of European Banking Supervisors said Friday the seven banks would see their capital positions fall below levels deemed sufficient in the case of what it called a "sovereign shock" that hits the price of government bonds they invested in.

The regulator said the banks need to raise euro3.5 billion to shore up their finances.

The European Union says the results "confirm the overall resilience" of the continent's banking system.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.

LONDON (AP) — Seven of 91 European banks failed stress tests aimed at measuring their strength in case the continent's government debt crisis worsens sharply.

The Committee of European Banking Supervisors said Friday that the seven banks would see their capital positions fall below the levels deemed sufficient in the case of what it called a "sovereign shock" that hits the prices of government bonds they invested in.

The biggest failure was Germany's nationalized lender Hypo Real Estate Holding AG, though that had been widely expected in the markets. Results are still coming in.

The tests are aimed at reassuring markets that Europe's banking system can weather any bumps in the road ahead.

http://news.yahoo.com/s/ap/20100723/...e_stress_tests

[Chomsky]

Re: How many banks will fail the European stress test?

NYT piece on it:

Seven Banks in Europe Fail ‘Stress Test’ for Scant Capital



FRANKFURT — Seven of Europe’s 91 largest banks could not survive an unexpected decline in economic growth or a sharp deterioration in the value of European government bonds, and will need to raise more capital, regulators said Friday in releasing results of closely watched bank stress tests.

Banks to flunk were Hypo Real Estate, a Munich-based bank that is already government-owned after a bailout, ATEBank of Greece and five Spanish savings banks.

Several other banks passed the test, but narrowly enough that they may also face market pressure to increase their reserves. That group included Postbank, one of Germany’s biggest publicly traded banks.

Governments in the countries affected said they were ready with measures to help the banks raise more money.

The stress tests, similar to an exercise conducted in the United States last year, were intended to rebuild confidence in European financial institutions that has been shaken by the sovereign debt crisis. Uncertainty about which banks may be sitting on piles of Greek debt and other potentially toxic assets has made institutions reluctant to lend to each other as well as to businesses, and acted as a drag on economic growth.

Whether the tests succeed in reviving confidence depends on whether investors and analysts believe they were severe enough to expose vulnerable banks. That may not be clear for several days.

Some banks had already moved to raise capital ahead of the results. National Bank of Greece , which passed the test, said Friday it sold 450 million euros, or $579 million, of 10-year bonds to boost its regulatory capital. “The sale process was completed within just 4 days, reflecting the investment community’s confidence in NBG,” the lender said.

Banca Civica, a merger of three smaller savings banks in Spain, failed the test. But it said ahead of the results that it had signed an agreement with J.C. Flowers, a U.S. buyout firm, to place 450 million euros in convertible bonds.

In a potential blow to the tests’ credibility, regulators did not examine whether banks could withstand a debt default by Greece or any other European country. European authorities — in contrast to many economists — consider such a scenario unthinkable.

But in a compromise, banks detailed their holdings of Greek, Spanish, Portugese and other sovereign bonds. The disclosure clears up intense speculation about which banks are most exposed and allows analysts to run their own calculations of the consequences of default.

Authorities across Europe were clearly nervous about market reaction to the tests and delayed releasing the results until after European stock markets closed. Trading was relatively flat Friday, although bank shares were down.

Germany’s nine public-sector landesbanks all passed — a result that could encourage skepticism about whether the criteria were harsh enough. Many analysts regard the state-controlled landesbanks, which suffered billions in losses from subprime assets and other ill-advised investments, as overly susceptible to political influence and lacking a strategy to be consistently profitable.

Franz-Christoph Zeitler, a member of the executive board of Germany’s Bundesbank, said that critics did not take into account the massive aid they have received in the last year.

“It is a very serious test,” he said at a news conference in Frankfurt. “All this criticism was absolutely premature.”

Norddeutsche Landesbank, based in Hanover, passed narrowly as did Postbank, a private sector bank. But Mr. Zeitler said that neither will need to raise new capital.

Authorities argued that, in contrast to the U.S. stress tests last year, the European tests came after a massive rescue effort in which European Union countries staked more than a quarter of the bloc’s G.D.P. to prevent the landesbanks and other troubled institutions from failing. Therefore, authorities said, the comparatively high pass rate was justified. In the United States, 10 of the 19 banks tested were told they needed to raise a total of $75 billion in new capital.

The four main French banks, representing 80 percent of the banking assets in the country, all passed easily. “These result shows that they remain capable of ensuring a strong financing of the economy both under the central scenario and under the highly stressed scenario,” Mr. Noyer said.

Coming days will reveal whether the tests will end banks’ mistrust of each others’ creditworthiness and encourage interbank lending, which is crucial to normal functioning of the financial system and ultimately the overall economy. In May, money markets nearly froze as prices for Greek bonds plummeted, prompting authorities to take extraordinary measures to prevent a crisis that could have threatened the solvency of some banks.

On May 10 European Union officials and the International Monetary Fund pledged 750 billion euros, or nearly $1 billion, to guarantee the sovereign debt of member nations. The European Central Bank also began buying Greek and other government and corporate debt on open markets to restore trading in the sovereign paper, an unprecedented move that provoked dissent within the bank.

The E.C.B. is anxious to wean institutions off the almost unlimited cheap loans it has been providing since the beginning of the financial crisis, but cannot do so unless banks resume lending to each other.

In a second round due in two weeks, the tests will be expanded to bank subsidiaries, such as the eastern European institutions owned by Vienna-based banks.

The stress tests were the most extensive ever conducted in Europe, covering 65 percent of the total banking market and 20 countries from Ireland to Poland. Regulators nearly tripled the number of banks participating in part because of prodding from U.S. Secretary Timothy Geithner, who earlier this year expressed concern that European authorities did not have the sovereign debt crisis under control.

Disclosure of the test results was also unprecedented, and came only after extensive negotiations with banks, which in Germany and some other countries could not legally be compelled to release the data. Earlier stress test exercises covered far fewer banks and authorities released only general information about the results.


Matthew Saltmarsh contributed reporting from Paris.