Business

Several European Banks Flunk Recession Stress Test

Posted on July 19, 2011 at 2:48pm by Becket Adams
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In a a comprehensive test designed to predict how certain banks would fare in another recession, eight of 90 European banks flunked with 16 more “barely passing,” reports The Associated Press. This has led analysts to doubt whether the test results would restore confidence in Europe’s unstable financial sector.

“Some countries challenged the results as inaccurate and overly pessimistic, saying they would not force their weaker banks to raise new cash. Economists warned that the tests were insufficient because they did not simulate the main risk hanging over Europe, a default by Greece,” the AP reported.

Business leader were mostly satisfied with the results because the euro was barely affected in the given scenarios. However, several analysts questioned whether the tests achieved its overall goal, that is, to restoring and instill a sense of confidence in an economy that is carrying billions in debt from like Greece, Ireland and Portugal.

“The publication of these results will not assuage investors’ fears over the resilience of the EU banking sector,” said Marie Diron, senior economic adviser for Ernst & Young.

While the tests were good for singling out exceptionally weak banks, Diron noted that debt default was “the single greatest risk facing the European banking sector at present.”

When it presented the results, the European Banking Authority (EBA) said the failing banks needed to raise a total of €2.5 billion ($3.5 billion) to improve their safety-net capital. Among the countries with banks that were in danger were:

1) Spain. Commonly seen as the next-weakest link in the 17-country eurozone, they had the worst test result. Five banks (Catalunya Caixa, Caja de Ahorros de Mediterraneo, Banco Pastor, Unnim and Group Caja3) flunked the test miserably, while seven others barely scraped by.

2) Greece. Two lenders, EFG Eurobank and government-owned ATEBank, flunked the tests with two others almost failing.

3) Austria. Oesterreichische Volksbank AG was the only lender outside the “crisis countries” to not pass, though German Landesbank Helaba dropped out of the tests earlier this week, stating that the EBA refused to take into account capital it had set aside (“banking regulator‘s decision to not count certain types of capital for its stress scenarios has come under fire from several countries and could become a major hurdle for the tests’ credibility”).

4) One bank in Slovenia, one in Italy, one in Cyprus, and two in Portugal also only just survived the EBA’s stress test.

“I refuse to accept that the five failed the test,” Bank of Spain Governor Miguel Angel Fernandez Ordonez said Friday in the Associated Press report, insisting that none of the Spanish banks had to raise additional capital.

German officials also questioned the tests’ results, saying they saw no reason for any of their banks to take action, even though two – HSH Nordbank AG and Norddeutsche Landesbank – were categorized as having “barely passed.”.

Nordbank and Norddeutsche Landesbank both challenged the stress test results, saying they didn’t reflect how strong they were.

“The EBA said Friday that the main reason so few banks failed the test was that it gave lenders the opportunity to raise capital ahead of the result’s release. At the end of last year, 20 banks would have failed the tests and between January and April lenders raised a total of €50 billion ($71 billion) in preparation for the test,” The Associated Press reported.

Now if we could get the banks (both here and internationally) to behave as if they were constantly under tests conditions, then perhaps we could get them to behave more responsibly.

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Comments (24)

cassandra
Posted on July 20, 2011 at 8:56pm
was that sign with the stars suppose to be like the flag of islam
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slvrserfr
Posted on July 19, 2011 at 9:05pm
The Euro will tank and the dollar will rally once this debt ceiling situation is resolved.
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miles from nowhere
Posted on July 19, 2011 at 4:45pm
Europe is a flunkie, even the people that live there are flunkies.
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- tower7femacamp
  Posted on July 19, 2011 at 8:29pm
  In mainstream financial circles, the concept of a global currency is often spoken of only with an atmosphere of caution. It is approached always in hypothetical terms. It is whispered of as some far off dream; a socio-economic moon landing in the far reaches of fiscal space. Perhaps in 2015, or 2020, or maybe 2050, but certainly never just over the horizon, or right around the corner posing as an innocuous trade asset created over 40 years ago and used only on rare occasions. Unfortunately, the development of a centralized global security representing the creation of a supranational economic body is much closer than many would care to admit…
  http://www.infowars.com/6-steps-by-the-imf-for-a-one-world-currency/
  Report Post »
fastfacts
Posted on July 19, 2011 at 4:05pm
IT IS SCARIER THAN REPORTED…

The new news of the day is that RBC Europe Chief said that the stress test wasn’t stressful on banks at all and should be redone. ( http://url2it.com/ftqo ) He saying they need to be redone and there have been 8 out of only 90 banks that have already failed?
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Lesbian Packing Hollow Points
Posted on July 19, 2011 at 4:01pm
Didn’t mention that the Canadian military using U.S. software ran a simulation and determined that Greece is gonna default. Bank on it. The software has a track record of 85% accuracy.

http://www.canada.com/business/fp/Military+software+predicts+Greek+default/5119291/story.html?id=5119291

And when they default, Ireland and Portugal and Italy are gonna be wondering why THEY have to continue with austerity measures and pay back their debt and then THEY are gonna default, and then the Euro’s dive is gonna make the U.S.Dollar’s decline look like a leisurely down hill stroll.
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- saranda
  Posted on July 19, 2011 at 4:26pm
  Just for clarification, this was reported by canada.com and was not a Canadian military simulation. The company who built the software for the US military to use in Iraq ran the simulation and a Canadian news agency reported it.
  Greece has been destined to default since the problems arose, and the demise of the Euro is not as ominous as some think it is. As we know, it is tough enough trying to get states with different cultures and political leanings to agree (ie Texas and Oregon), try working with different countries with no commonality (ie Germany and Greece). Amazing to me that there have been no countries booted already.
  Report Post »
- Lesbian Packing Hollow Points
  Posted on July 19, 2011 at 9:25pm
  Mea Culpa. I thought the story said it was the U.S. military when I read it last night, but when I went to link it, the URL threw me.
  
  I just want to see the price expressed in U.S.$ of several items of the electronic variety that I want to buy come down to something reasonable.
  Report Post »
JRook
Posted on July 19, 2011 at 3:40pm
No reference point here which is usually the case. 9 out of 90 is approx. 9 % and 24 out of 90 would yield 26.6%. Not dramatically different than the US bank figure which is estimated at 25%. Given the extent to which their balanced sheets have been eroded by bad real estate loans and devaluing of the real estate a figure that should be expected. Again, while the following fact is perhaps inconvenient for those who want to blame Obama for everything, the real estate debacle and bank problems began in October 2007…. wasn’t somebody else President at the time?
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- fatjack
  Posted on July 19, 2011 at 3:45pm
  You sound like Roosevelt. Oops and odumber.
  Report Post »
- JRook
  Posted on July 19, 2011 at 4:03pm
  @fatjack Oh ok tiger. What part do you not agree with? So let’s hear you intelligent analysis. That is of course if you can formulate one that is not based on ideology.
  Report Post »
- fatjack
  Posted on July 19, 2011 at 5:13pm
  JRook
  Posted on July 19, 2011 at 4:03pm
  =================================================
  Your whole statement is flawed, seaweed.
  Report Post »
- JRook
  Posted on July 19, 2011 at 5:46pm
  @fatjack Just as I thought …
  Report Post »
- fatjack
  Posted on July 19, 2011 at 5:54pm
  JRook
  Posted on July 19, 2011 at 5:46pm
  
  @fatjack Just as I thought …
  ====================================
  That’s the problem you troll have, you don’t “thought”.
  Report Post »
- LibertyMama
  Posted on July 19, 2011 at 9:14pm
  Its true… Bush continued the policies began by Clinton that encouraged lax lending requirements for low-income people. The problem will continue until people stop apologizing for being productive citizens, and are made to feel that their success demands them to be chained to those who cannot or will not produce. Every pot must sit on its own bottom… in case that analogy isn’t clear – everyone must carry their own weight. – See any of Ayn Rand’s books as a reference.
  Report Post »
cloudsofwar
Posted on July 19, 2011 at 3:27pm
Euro banks? who cares, what about our banks.is our money safe? hell no. not with Obama and little timmy.
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RightPolitically
Posted on July 19, 2011 at 3:23pm
Wait until the US collapses under its own long running flirtation with social justice and entitlements running out of control. Who will save Europe this time after we can no longer do so? China? Russia? The “head-cutters?” Europe is soon to learn what life will be like without sixty more years of US subsidizing their Socialist Utopias……Think Greece is bad, wait until the entirety of Western Europe falls under the weight of its own excesses!
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- vennoye
  Posted on July 19, 2011 at 4:19pm
  Ah, the joys of Mutually Assured Economic Destruction!!! This is going to look like the “WAVE” at a sporting event!!
  Report Post »
freeweever
Posted on July 19, 2011 at 3:16pm
The word comprehensive is not a real word anymore it is a trigger word for the leftist Cretins who roam the earth. It means we are making sure absofu-kingpossitivelutely nothing is being done, besides setting up panels that accomplish nothing but spending money and testing shrimp. Hope you all can “serf” because if you follow these idiots your gonna need to.
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freeweever
Posted on July 19, 2011 at 3:11pm
It will all be our fault and the jewish people, welcome to scapegoat land where the ignorant solve problems with “chicken little” hearts. Yuck fou progressives!!!!!!!!
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Snowleopard {gallery of cat folks}
Posted on July 19, 2011 at 3:00pm
So effectivly 24 of 90 banks are on the edge of annhilation? Or nearly 30%? And this is the way the administration wants us to go?

Why are more people howling about the mess we are being pushed into? How long have we forgotten to dream and think clearly here not to see what is happening?

We still have a bit of time America, not much, yet just a bit…to be ready for when the American Winter hits hard.
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- sWampy
  Posted on July 19, 2011 at 3:33pm
  Sadly my parents generation gave up our freedom in the mid 60‘s to early 70’s, we are past getting our freedoms back without revolution. ;-/
  Report Post »
- fatjack
  Posted on July 19, 2011 at 3:41pm
  The Euro is the canary in the coal mine. When it goes we only have days.
  Report Post »
- MidWestMom
  Posted on July 19, 2011 at 5:05pm
  @ fatjack
  
  Agree completely. And the clock is ticking down…
  Report Post »

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