CreditSights has created a sort of EU bank stressometer.
In their words, it seeks to “exploit” the additional disclosure on sovereign risk published in the CEBS-administered European bank stress tests. And while it’s very fun to play around with (yes, FT Alphaville is easily amused) it won’t do much to help alleviate still lingering questions surrounding certain missing exposure to Greece — specifically within the German banks.
As analysts John Raymond, Simon Adamson and Puja Poojara put it:
As a reality check, the numbers from the CEBS exercise can be compared against the system wide statistics provided on a quarterly basis by the BIS for each country. We have produced updated tables with the BIS’s recently-released provisional figures for March 2010, both in US dollars (as published) and converted into euros, to match the CEBS figures. The most talked-about items in there are the exposures of the French and German banking systems to counterparties domiciled in Greece. The German system figure is hard to reconcile, since the BIS statistics show a €33 bln exposure to Greek counterparties, while gross trading and banking book exposure from the ten German banks that gave disclosures under the CEBS exercise was only €8.6 bln for Greek sovereign entities. That leaves more than €24 bln unaccounted for. Part of it will be non-sovereign exposures to Greek counterparties (e.g. shipping), and some of the difference may reflect different BIS versus CEBS reporting universes, but a big chunk of it must be sovereign bond holdings that have not been disclosed by four of the stress-tested German banks, which ties in with suspicions about their motives for non-disclosure. For example, Hypo Real Estate has previously reported that it holds €9.8 bln of Greek debt, of which €7.4 bln is sovereign exposure. The position in France looks much clearer.
Market-watchers will of course know that a total of six German banks didn’t disclose their sovereign exposure in the CEBS test results. All six of them – Postbank, Deutsche Bank, WGZ, DZ, Hypo and Landesbank Berlin — did however, eventually unveil their holdings a few days later. Collectively, their Greece exposure seems to be less than €15bn — still far below the admittedly-imperfect BIS statistics.
Anyway, CreditSights has incorporated the Deutsche Bank and Postbank disclosures in its spreadsheet (but not the other four, for some reason). That, means we also get some interesting tidbits on DB’s hedging of its sovereign exposure. And some curious German bank hedging against, err, Germany:
We have added a final tab, RAW Gross minus Net, to show which banks have made the most active use of hedging to reduce their net exposure, although this hedging effect is not broken down between the trading book and the banking book. The one that stands out as by far the biggest user of hedging to manage down its net exposure is Deutsche Bank (€21 bln difference spread across all countries, reflecting its large trading operations and active use of hedging in its credit business). In another example, BBVA shows a material difference of €8.1 bln between its gross and net exposures to Spanish sovereign entities. Some of the German banks also show surprisingly large differences between their gross and net exposures to their home sovereign, implying some substantial hedging activity: the largest is DekaBank, reporting €12.1 bln gross exposure to Germany (almost evenly split between banking and trading books), but only €570 mln net exposure.
The Excel sheet is available on the CreditSights website, and let’s you do rather unusual things like vary the level of Tier 1 capital required to pass the stress tests. Shifting the requirement to 10 per cent, for instance, will lead to 67 of the 91 banks tested failing — including almost all of the German ones.
Mwahaha.
Related link:
Stressed but blessed - FT analysis
Germany accused of reneging on bank tests - FT
European stress tests: Merits and demerits… - Market Melange
Who’s exposed to Greece? (II) - FT Alphaville