A series of European banks have passed the European Banking Authority “stress tests” which aim to assess whether financial institutions have sufficient capital to withstand an “adverse but plausible scenario”.
Eight banks fell below the required capital threshold of 5%, with a further sixteen falling into the 5-6% capital threshold. The total capital shortfall identified by the EBA is €2.5 billion.
The eight banks which failed the test are as follows:
- Oesterreichische Volksbanken AG (Austria) – needs an additional €160 million
- EFG Eurobank Ergasias S.A. (Greece) – needs an additional €58 million
- ATEbank (Greece) – needs an additional €713 million
- Caixa D’Estalvis De Catalunya, Tarragona I Manresa (Spain) – needs an additional €75 million
- Banco Pastor, S.A. (Spain) – needs an additional €317 million
- Caixa D’Estalvis Unio De Caixes De Maniieu, Sabadell I Terrassa (Spain) – €85 million
- Grupo Caja3 (Spain) – €140 million
- Caja De Ahorros Del Mediterraneo (Spain) – €947 million
The EBA has recommended that national supervisory bodies instruct those banks at the lower end of the capital ratio list to address potential vulnerabilities through restrictions on dividends, deleveraging, issuance of fresh capital or conversion of lower-quality instruments into Core Tier 1 capital.
The European Central Bank agreed in a statement:
“The ECB encourages the governments to fully implement the commitment they undertook at the meeting of the Ecofin Council on 12 July 2011 to ensure that the necessary remedial actions are taken.”
The Swedish Ministry of Finance welcomed the “enhanced transparency” in the EBA report test results as well as the “disclosure of the sovereign exposures of participating banking groups”.
The Table of Stress Test Results by Country “Banks capital ratios without capital raising”
These original numbers were put on hold to give an incentive to banks to raise more capital before the cut-off for final figures in April 2011. As a result, the original spreadsheet shows four Spanish banks, one Greek bank and two Irish institutions falling into the dangerously low category of less than 2% capital ratio, with a total of 20 below 5%. That situation has now improved with only eight banks below the 5% threshold.