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’European banks ‘need tons of money’, says GMO
In a note released on Tuesday, GMO, the global asset management firm headed by Jeremy Grantham, writes that ”European banks need tons of money” to correct capital shortfalls. This much, we know.
But the five scenarios used by Richard P.
Is there a world outside EBA capital targets? [updated]
Update — FT Alphaville has heard that the answer to this question is in fact… yes. See below for more details.
The official EBA numbers on European bank capital shortfalls are out. In aggregate it’s €114.7bn.
Meet the new Fed stress tests…
… same as the old Fed stress tests.
At least that’s the prediction of Nomura’s Glenn Schorr, whose note published on Thursday plays down any expectations that the forthcoming Comprehensive Capital Analysis and Review (CCAR,
EBA: €106bn of bank capital needed — we think
Updated — We’ve added a bit more on how the EBA might treat convertible bonds as part of the capital targets. Also see the FT’s reporting on the issue.
The key chart from the European Banking Authority’s release late on Wednesday night (featuring as its target the widely trailed 9 per cent Core Tier 1 capital rato for banks):
Building a better bank recap, discount curve edition
At some point on Wednesday, eurozone governments will say they want banks to find an unspecified amount capital, based on revised sovereign haircuts which… we still don’t know a lot about.
We know that sovereign bond positions will be marked down,
Taking the stress test to seven
(Reuters) European Union banking regulator EBA has demanded that lenders achieve a core tier one ratio of at least seven per cent in the current round of internal stress tests, banking and regulatory sources told Reuters on Tuesday.
Blood from an EBA stress test stone
For now, the European Banking Authority’s 2011 stress tests are a starting point to determine the potential bill for recapitalising euro banks for their sovereign exposure. Most analyst estimates of capital needs — those big juicy €100bn,
Accounting for sovereign stress
Or the trouble “reviewing bank capital positions” — euphemism du jour from the European Banking Authority.
The EBA’s denied on Thursday that they’ll do actual new stress tests on banks in order to model bigger write-downs of peripheral sovereign debt and possibly identify where more capital is needed,
The end of the beginning?
Have Eurozone policy makers finally got it?
The signs are certainly encouraging, says Citigroup.
… in the last 2 weeks we have moved from not being sure that Europe was coordinated enough and didn’t ‘get’ it &
The IMF can make your €200bn capital hole disappear in days!
What capital hole? The hole was never there! We do not know this €200bn capital hole of which you speak. This is spillover risk!
Charts via Chapter 1 of the IMF’s latest Global Financial Stability Report,
Czech these periphery write-downs out
Only in a stress test, but still…
From the Czech central bank’s August stress-testing of its banks, published on Monday:
The Recession stress scenario assumes a drop in economic activity as a result of a renewed recession in the Czech Republic’s main trading partner countries,
Mirror, mirror on the wall, who has the highest DTAs of all?
Deferred Tax Assets (DTAs) have been mentioned (usually critically) on this blog many times before. Put very simply, they are tax carryforwards that can be included in banks’ Core Tier 1 capital ratios.
Even more Greek exposure, at local banks
Actually, to put a number on it, the Greek banking system and the two biggest Cypriot lenders possess €13.8bn more exposure to the Greek sovereign than we thought they did, according to stress test disclosures.
Playing provisions to pass a test
It’s not hard to criticise the methodology of Europe’s stress tests.
From the inclusion of mitigating factors not yet undertaken by banks, to the lack of a full sovereign default, you can take your pick,
Market stress
A stress test theme in the biggest fallers in Europe at pixel time:
Although shares in Greece’s Atebank (which failed) were up 8.8 per cent. Marvellous!
European bank admirers anonymous
Let the stress test analyses commence…
Aside from the their acceptance of “mitigation” measures taken by the tested banks, one of the big criticisms European Banking Authority’s stress tests is the rather mild sovereign scenarios they considered.
Stress, mitigated
So, eight banks officially failed Europe’s 2011 stress tests.
Exactly 20 banks would have dipped below the 5 per cent Core Tier 1 capital pass rate had it not been for capital raising undertaken between January and April of this year,
Those European bank stress test results…
They’re here!
Eight banks failed — five Spanish, two Greek, one Austrian — by posting capital ratios below 5 per cent. But sixteen almost failed, posting ratios between 5-6 per cent.
The names of the fallen (we’ll add capital shortfalls as we get them):
So how did the stress test go, Atebank?
And yes, it speaks volumes we asked the same question a year ago, and are expecting exactly the same answer. ‘Til next year then!
Related link:
Greek banks boost capital ahead of stress tests –
The unstressed tests, and Italy bonds
We’re getting the results of the European bank stress tests later (at 1700 London time) and while we’ll discover who has failed, or nearly failed, the raw data on sovereign exposures, as Jonathan Weil notes,
Stress testing bailouts, not banks
It’s a little over a week until we get the results of Europe’s second round of stress tests.
Here on FT Alphaville we’ve often wondered what’s the point, given that every one seems to think that the assumptions used by the stress test administrators,
Citi joins the European stress-test jamboree
Roll(over) up, roll(over) up, for the latest unofficial European bank stress test.
For previous editions see here, here, and here.
This week’s contestant: Citi.
And it has given us two for the price of one:
Bafin bashes the EBA over stress tests
Woah, woah, woah. What’s got under Bafin’s bonnet?
Bafin president Jochen Sanio had some harsh words for the European Banking Authority (EBA), curators of the European bank stress tests, in the regulator’s annual report published on Monday.
Standard & Poor’s speak the truth on Europe’s stress tests
Standard & Poor’s has dug into the European banking stress tests before.
But its latest review — out on Wednesday — really sums up the matter. It’s always been politically impossible for the European Banking Authority to assume real (restructuring) losses in the exercise.
Europe stress test benchmarks and banks revealed [updated]
Ninety banks and an own-brand core equity requirement of five per cent of risk-weighted assets…
That’s one less bank than last year and a lot of capital questions (The merged cajas of last year have reduced the tally a bit).
Stress-testing Ireland’s stress testers
BlackRock is really making a name for itself in financial crisis-related services — valuing the Fed’s Maiden Lane portfolio and undertaking the Irish banking stress tests too. But Ireland’s central bank also hired Boston Consulting Group (BCG) to supervise the stress testers,
Irish loan losses, forbearance, and a bad feeling
We’re still working our way through the Irish banks’ stress tests results. But there’s already a conundrum in assessing the severity of the tests.
Severity being the essential variable here — a severe test underlines Ireland’s vulnerability to restructuring and makes the case to outside actors that they need to provide backstop funding,
Ireland: does the fire sale start here?
You’ve already had the stress test results (more on those in a moment), here’s the Irish finance minister’s statement regarding what survives of Ireland’s banking system.
In short: a rump Bank of Ireland,
Ireland’s stress test results [updated]
Here’s the full report, click image to open:
The bank recapitalisation grand total: €24bn
Allied Irish Banks: €13.3bn
Bank of Ireland: €5.2bn
EBS: €1.5bn
Irish Life & Permanent: