European bank stress tests revealed

Image copyright Getty Images

RBS Group may have to raise fresh funds after stress tests showed it performed poorly in adverse economic conditions.

The European stress tests were designed to test the ability of banks to withstand tough trading conditions, including an economic downturn.

The health check of 51 lenders in the EU were carried out by the London-based European Banking Authority.

RBS said the tests showed its "continued progress" in improving its balance sheet.

The tests measured the buffer of capital that banks can use up in bad times, without causing the bank to fail.

Under the stress test RBS"s capital levels fell by 7.5% when the impact of a major economic shock was applied. That means RBS may be required to raise more money to reassure regulators.

"The EBA stress test results demonstrate our continued progress towards transforming the balance sheet to being safe and sustainable," said Ewen Stevenson, RBS chief financial officer.

"We are confident that in delivering our strategy, we will transform RBS into a low risk, resilient bank," he added.

Responding to the tests the Bank of England said in a statement: "The results for the four banks are consistent with those of previous Bank of England stress tests. They provide evidence that major UK banks have the resilience necessary to maintain lending to the real economy, even in a macroeconomic stress scenario."

Worst performer

Image copyright AFP

Italy"s Monte dei Paschi di Siena was by far the worst performer, with the test forecasting that 14% of its capital would be wiped out under adverse conditions.

Shortly before the results of the stress test were released, Monte dei Paschi di Siena announced that it had secured the backing of a consortium of banks for a rescue plan.

The plan involves the sale of €9.2bn of bad loans and an injection of €5bn of fresh capital.

Founded in 1472, Monte dei Paschi is one of the world"s oldest banks, but in recent years has been one of Europe"s weakest, with €50bn of bad loans.

Allied Irish Bank also performed poorly.

Original Article

European bank stress tests revealed
http://latiendadejm.com/blog/european-bank-stress-tests-revealed/

| | La tienda de JM