EBA to publish stress tests after markets close

Europe-wide banking regulator the European Banking Authority will publish results of stress tests for 91 banks across the region later today, once markets have closed.

The results will reveal whether banks across Europe have succeeded in meeting core capital ratio requirements of 5%, the guideline recommended by Europe’s securities markets regulator, the European Securities and Markets Authority.

Of the 91 banks being tested, it is expected five to 10 will not meet the stress test requirements.

Individual banks will also be compelled to release data showing their credit and sovereign exposures. It comes at a time of escalating fears on whether Greece and other economies in peripheral Europe will be able to meet their debt obligations. Fears over Italy’s sovereign debt stock have come to the fore in the past week, with a debt to GDP ratio of 120%.

“If any Italian banks are named we could see some Euro selling,” said London foreign exchange brokerage Clear Currency in a statement. Last year, the Italian banks which submitted stress test results included UniCredit, Intesa San Paolo, Banco Popolare, and UBI Banca.

Ahead of the results, director at the UK arm of accountancy firm PwC Richard Barfield said: “The real interest for UK banks and the sector’s investors will be individual banks’ sovereign exposures particularly to Greece, Ireland, Portugal, Spain and Italy. “

He added UK banks are likely to fare quite well in the tests in relation to their European counterparts. Last year, RBS, HSBC, Barclays, Lloyds submitted results.

Results are being published on the EBA’s website at 17.00 British Summertime, after markets have closed for the weekend so they cannot react immediately. At 17.01 BST, national regulators across Europe will publish more detailed bank by bank results.

Barfield warned the stress tests have the potential to create more systemic panic at a time of weakness across the eurozone.

“Stress testing is about risk management – not creating risk in the system. The results are being released at a time of severe stress across the euro zone and it is vital that the results of the EBA’s test do not lead to unintended consequences,” he said.

For last year’s stress tests, the 91 banks surveyed included a number of Greek banks: National Bank of Greece, Agricultural Bank of Greece, and Hellenic Postbank. France’s “big three”, BNP Paribas, Credit Agricole, and Societe Generale, as well as BPCE, also gave results. A number of German institutions were included, such as Deutsche Bank, Commerzbank, Deutsche Postbank, and DZ Bank. Belgium’s KBC Bank and Dexia also submitted results. From the Netherlands, banks bailed out by the state including ING, ABN AMRO/Fortis bank, and SNS, were made to provide information. Rabobank, which did not take state aid, also gave results.

From Spain, several of its troubled cajas banks revealed the state of their balance sheets, as well as financial giants Espirito Santo Financial Group and Santander.

Bank of Ireland and Allied Irish Banks, both of which had their debt downgraded to junk status yesterday following Ireland’s sovereign downgrade a day earlier, were also stress tested last year.

Erste Group Bank, Raiffeisen Bank, Danske Bank, HSH Nordbank, Banque et Caisse D’Epargne De L’Etat, Nordea, Swedbank were among the other banks scrutinised.

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