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Results of the EBA stress test

Although there was no threshold, the exercise revealed capital weaknesses in some banks. Amongst the more weaker banks have been Monte Dei Paschi, Raiffeisen Zentralbank, Banco Popular, Allied Irish Bank, but also big banks like Deutsche Bank, Commerzbank, Barclays and Unicredit. According to the EBA the aim of the 2016 EU-wide stress test was to assess the resilience of EU banks to adverse economic developments, so as to understand remaining vulnerabilities, complete the repair of the EU banking sector and increase confidence.

29 July 2016
European Banking Authority

The European Banking Authority published the results of the 2016 EU-wide stress test of 51 banks from 15 EU and EEA countries covering around 70% of banking assets in each jurisdiction and across the EU. The objective of the stress test is to provide supervisors, banks and other market participants with a common analytical framework to consistently compare and assess the resilience of large EU banks to adverse economic developments.

The EU banking sector has significant shored up its capital base in recent years leading to a starting point capital position for the stress test sample of 13.2 % CET1 ratio at the end 2015. This is 200 bps higher than the sample in 2014 and 400 bps higher than in 2011.  The hypothetical scenario leads to a stressed impact of 380 bps on the CET1 capital ratio, bringing it across the sample to 9.4% at the end of 2018.  The CET1 fully loaded ratio falls from 12.6% to 9.2%, while the aggregate leverage ratio decreases from 5.2% to 4.2% in the adverse scenario.

Link to the 2016 EU-wide stress test results

Link to the acompanying press release

Press coverage:

Bloomberg, 1 August 2016:  Europe’s stress tests fail again

Reuters, 30 July 2016:  No clean bill of health for EU banks in stress test

Reuters, 29 July 2016:  Deutsche Bank scrapes through European banks stress test

FT, 29 July 2016:  Stress tests find Europe’s bank sector would survive fresh crisis

Telegraph, 29 July 2016:  Most banks weather the latest stress tests but Monte dei Paschi wiped out while RBS and AIB are hit hard

Spiegel, 29 July 2016:  Europas Banken kommen glimpflich durch den Stresstest

Sueddeutsche, 30 July 2016:  Deutschlands Kreditwirtschaft ist in erbärmlichem Zustand