Europe’s oldest lender, Banca Monte dei Paschi di Siena SpA (BMPS.MI) has been at the center of the Italian banking crisis, with nearly 50 billion euros ($55.49 billion) in bad loans. Please click the button below to manage your account.
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The world’s oldest operating bank would be unlikely to cope with a shock to the global economy or strained financial markets, claims the European Banking Authority (EBA).
It closed the day at just under 0.31 euros, up 6.3 percent. The European banking rules have to a great part been weakened by Germany’s reluctance to share risks in the financial system, making the regulators unable to find ways for the ailing banks to be recapitalized.
Banca Monte dei Paschi di Siena announced on Friday night that it had found a “definitive solution” to its legacy of bad loans.
“The latest European Union bank stress tests confirm that, on the whole, the region’s banks are in a much healthier position than a few years ago”, Capital Economics noted.
In 2014, if banks had a capital buffer of 5.5% after the stress test, then they were considered healthy, and analysts use that as an informal benchmark. You have now viewed your allowance of free articles. The rules are meant to raise banks’ assessments of the risks in their corporate loan books, which the FSA has said are now too low.
Like Monte dei Paschi, Allied Irish Banks was also below this level at 4.31 percent.
Given Italy’s position as the eurozone’s third-largest economy, any major financial problems that put in doubt the state’s own finances would create a new crisis for the currency bloc that could outweigh those of the past few years, notably in Greece. RBS, which was bailed out by the government in 2008 with the United Kingdom taxpayer continuing to hold a 73% stake in the bank, also performed poorly. He has promised a new strategic plan by the end of the year.
Deutsche Bank and Commerzbank both had core ratios of below 8 percent at the end of the test, although Deutsche said it was on track to reach a core ratio of at least 12.5 percent by the end of 2018. Under the latest test scenario, some €269 billion would be wiped off the capital bases of the banks.
This is good as far as it goes, but the truth is that Monte dei Paschi is the tip of a barely concealed iceberg. Banco Popolare and UniCredit were also shown to be less able to the deal with the stress test than the other bank’s tested.
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Michael Hewson, chief market analyst at CMC Markets in London, says the tests’ findings failed to address numerous concerns investors have about the state of Europe’s banks, including the rising costs they face for parking their cash at the European Central Bank. In particular, the potential economic impact of a British exit suggests central banks will keep interest rates lower for longer something that weighs heavily on the earnings of banks, which rely on higher rates to make money when lending.
