Stress tests creditability questioned
(26 July 2010− Europe) Only seven European banks have failed a stress test undertaken by the Committee of European Banking Supervisors (CEBS), leaving many analysts questioning the tests creditability.
The results showed that one German bank, five Spanish banks, and one Greek bank failed the stress test.
The failed Spanish banks include Espiga, Diada, Banca Civica, Cajasur, and Unnim. Greece’s ATEbank also failed after its tier one capital ratio came in at 4.36 percent and Germany’s Hypo Real Estate failed after scoring only 4.7 percent.
The CEBS had set a Tier 1 capital ratio target of 6 percent for banks.
Brian Dolen, chief currency strategist at Forex.com said that the results highlight earlier doubts and scepticism over the rigor of the stress-test. The market is probably dubious that so few European banks failed.
Senior Europe economist for Capital Economics, Jennifer Mckeown, shared the same position saying that any positive impact on sentiment will be limited by the fact that the tests were not particularly stringent.
The 'adverse' economic scenario incorporated a return to only a very mild recession next year and the prospect of an outright sovereign default, which is what has worried markets most, has not even been considered, Mr Mckeown added.
The failed Spanish banks include Espiga, Diada, Banca Civica, Cajasur, and Unnim. Greece’s ATEbank also failed after its tier one capital ratio came in at 4.36 percent and Germany’s Hypo Real Estate failed after scoring only 4.7 percent.
The CEBS had set a Tier 1 capital ratio target of 6 percent for banks.
Brian Dolen, chief currency strategist at Forex.com said that the results highlight earlier doubts and scepticism over the rigor of the stress-test. The market is probably dubious that so few European banks failed.
Senior Europe economist for Capital Economics, Jennifer Mckeown, shared the same position saying that any positive impact on sentiment will be limited by the fact that the tests were not particularly stringent.
The 'adverse' economic scenario incorporated a return to only a very mild recession next year and the prospect of an outright sovereign default, which is what has worried markets most, has not even been considered, Mr Mckeown added.
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