Spain’s Banco Popular, Bank of Ireland and Austria’s Raiffeisen all ended the test listed below this level at 6.62 percent, 6.15 percent, and 6.12 percent, respectively. Markets will likewise take a look at how many banks had the ability to keep a core ratio of capital to risk-weighted assets of 7 percent. That is because unlike previous European stress tests, the banks didn’t have to meet a specific capital hurdle to pass the exam. The amount raised by European banks this year so far is 73 percent less than at the same time in 2015, according to Dealogic figures, as investor appetite for banks has slowed.
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The EBA said the results showed there was still more work to do to put banks on a firmer footing.
The EU-wide stress tests showed that most of the 51 European banks that were scrutinized were strong enough to withstand a sharp drop in the economy and markets.
“The foundation and other shareholders thought that last year’s cash call would be sufficient, nobody expected new measures would be necessary”.
Their view is that for Barclays the disposal of businesses such as those in Africa instigated by its new chief executive, Jes Staley, would be important.
On the whole, the EBA reported that the European Union banking sector shows considerable resilience with a starting tier 1 common capital ratio (CET1) of 13.2 percent. Ahead of the stress tests, MPS has been desperately trying to secure a £4.2bn (€5bn) cash injection from investors in an effort to persuade markets it is stable. “It is not a forecast of Barclays’ profits”.
He said: “The EBA stress test results demonstrate our continued progress towards transforming the balance sheet to being safe and sustainable”.
“We are confident that in delivering our strategy, we will transform RBS into a low risk, resilient bank”, he added. Under the conditions, it was left with a capital buffer of 8.1 per cent. “These results are significantly above the group’s minimum capital requirements”, said Lloyds.
Deutsche Bank also did not perform any better than many of its peers and revealed a weaker reading in the stress test. For the first time, the European Union test consisted of the effect of conduct threats such as fines and settlements.
The results, which came out after stock exchanges closed in the US and Europe, could move markets on Monday.
A bank’s capital ratio measures the funds it has in reserve against the riskier assets it holds that could be vulnerable in the event of a crisis.
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Examples of possible measures aimed at strengthening a bank’s balance sheet would be selling off discounted portfolios of distressed debt, reducing over-exposure to types of loans deemed high-risk such as mortgage lending in overpriced regional markets, raising fresh money from investors to increase capital buffers against possible future losses, or reducing dividend payouts to investors and retaining a higher proportion of earnings for that same objective.
