However, the Italian banking sector overall was singled out as one of the weaker spots in Europe’s financial landscape. It is also now a certainty that UniCredit and Raiffeisen both must improve their capital position but they have also passed the test.
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Bank of Ireland and AIB both dismissed the tests as a snapshot in time, as it reflected the position at the end of previous year.
Italian bank stocks have been among hardest hit equities in recent months, as their €360 billion of bad loans were seen as threatening the stability of the eurozone financial system and potentially creating a new financial crisis.
There was no pass or fail mark for the EBA tests.
The 2016 EU-wide stress test was conducted by the EBA in cooperation with the MNB, the ECB, the European Commission and the European Systemic Risk Board (ESRB).
Italian 10-year government bond yields fell slightly on Monday to 1.16 percent, the lowest since March 2015, while most other euro zone equivalents were slightly higher on the day.
The tests suggested the 73%-taxpayer owned bank would be left with just an 8% capital ratio buffer.
The four other Italian banks subject to the test – Intesa Sanpaolo SpA ISP, -2.03%, UniCredit SpA UCG, -7.94%, Banco Popolare SC BP, -3.89% and Unione di Banche Italiane SpA UBI, -4.01% – all showed resilient capital levels under stressed scenarios. Instead, the EBA has left it up to investors and regulators to interpret the results.
RBS finance chief Ewen Stevenson said: “The EBA stress test results demonstrate our continued progress towards transforming the balance sheet to being safe and sustainable. With Brexit, the probability of that stress test becoming a reality is more plausible”, he said. However, only Monte dei Paschi had a negative CT1 (i.e. under the “adverse scenario” a capital ratio lower than 7%). The aggregate leverage ratio decreases from 5.2% to 4.2% in the adverse scenario.
The impact (not taking into consideration the effects of a Brexit yet) is mostly driven by credit risk losses of EUR‐349 bn contributing ‐370bps to the impact on the CET1 capital ratio. “Also it’s clear that the bank is short on capital – that’s easy for everyone to see”, said Mr Barua.
The 2016 stress test does not contain a pass/fail threshold and instead is created to be used as a crucial piece of information for the supervisory review process in 2016.
The share price of Monte dei Paschi di Siena (MPS) rose in early trading on Monday despite troubled Italian bank failing a European stress test on Friday.
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Quaestio Capital Management, on behalf of the Atlante fund, will subscribe the mezzanine notes for up to ca.
