Share this
Vineri, 24/10/2014
"Faith in the banking system is low any way; there are banks that people don't even go in anymore", says Ionel Blănculescu


     11 to 18 banks may fail the stress tests of the ECB

     *  The European Central Bank: "Any supposition concerning the final result of the tests would be a speculation"
         At least 11 European banks will not pass the stress tests conducted by the European Central Bank (ECB) out of about 130 lenders in the region, announces Spanish agency EFE, quoting anonymous banking sources.

       According to them, three Greek banks have failed the stress tests ("Alpha Bank", "Piraeus Bank" and "Eurobank)", three in Italy ("Banco Popolare", "Monte dei Paschi" and "Banca Popolare di Milano"), two in Austria ("Erste Bank" and another one that was not named), one in Cyprus (which was not named), "Dexia" in "Belgium and "Millennium BCP" in Portugal. According to Reuters, "Volksbank" is one of the Austrian banks that could fail the ECB tests.

       EFE did not provide details on the capital that the banks in question would need, but did mention that the number of banks that won't pass the stress tests could be changed at the last minute.

       The officials of the three Italian banks mentioned declined to make any comment on the news published by EFE, as did the representatives of "Alpha" and "Millennium BCP". An official Cypriot source quoted by Reuters said that EFE "is wrong", and the representatives of Austrian bank "Erste Group" have rejected the claims in the article. The other banks mentioned on the list did not react to the information published by EFE.

       While EFE claims that 11 European banks will fail the stress tests, the American bond fund Pimco, the largest in the world, expects that 18 lenders will fail the tests.

       Philippe Bodereau, banking expert at Pimco, considers that some credit cooperatives in Germany and Austria will fail the tests, as well as banks in the public sector and regional lenders from the southern edge of the Eurozone.

       "It is rather clear that there won't be many banks to fail the tests. In the last six to nine months, awaiting this exercise, important consolidations of banks' balance sheets have occurred", said Bodereau, quoted by Reuters. They have added that the major national banks in Northern and Southern Europe will pass the tests easily.

       According to Bodereau, given the recent volatility of the stock markets, the impact of the publication of the tests will more likely be positive rather than negative, and the stocks the major banks in the region may rise.

       "Many banks stocks were 10-20% more expensive in June, than they are now, and some are down compared to the beginning of the year", Bodereau said.

       On October 26th, the ECB will reveal which of the 130 major European banks need more capital to handle potential losses, based on an analysis of their financial situation and of the results of the stress tests that simulate the manner in which the banks would behave in the event of an economic crisis scenario.

       * BCE: "The results of the test weren't even sent to the banks themselves"

       The European Central Bank yesterday raised a warning against the speculation concerning the outcome of its stress tests. The ECB said that the final results of the tests have not even been sent to the involved banks themselves, meaning that it cannot comment on specific lenders.

       "Any supposition about the final outcome of the stress tests before the publication of the results on October 26th would be mere speculation", said a spokesperson of the ECB.

       In turn, the European Banking Authority, the agency that is in charge of coordinating the European stress tests on a European level, has announced a few days ago that the results are not final until they are published. (ALINA VASIESCU)

       The information which was published yesterday on the news streams of some European news agencies according to which several European banks would fail the stress tests represents the beginning of the end for the European banking system, claims economic analyst Ionel Blănculescu.

     He said: "If a decision is made to resort to the bail-in in the event of the stress tests, then the confidence in the banking system will be ruined. The statement that several banks could end up in this situation destroys the confidence in the system, which was very low anyway. There are banks that people don't even set foot in anymore. Let's hope that all of these statements are just stories".

     Nobody can tell in advance what the results of the stress tests are going to be, says Nicolae Cinteză, the head of the Oversight Department of the National Bank of Romania (NBR).

     He told us that the information published yesterday which states that certain European banks will not be able to pass the stress tests can not be confirmed by anybody.

     "I am going to find out on Friday night, after 20:00 hours, and on Saturday there will be a teleconference in which the members of the European Banking Authority that have the right to vote will participate. The results will be made public on Sunday night", Mr. Cinteză told us.

     Analyst Călin Rechea claims: "The experience of the previous stress tests has caused the authorities to pay particular attention to the new program for assessing the health of the European banking system. This is the last chance to regain the confidence of the markets and of investors. Unfortunately, the evolution of the economies in Eastern Europe since the beginning of the year shows that the hypotheses of the stress test could be far too optimistic. Therefore, the relevance of the speculations concerning the number of financial institutions that failed the test is rather low.

     What is important is for the market to think that the results published by the European Central Bank and the European Banking Authority are sufficiently transparent, in order to allow the recapitalization of the banks in an environment that is not affected by panic and contradictory statements from the authorities.

     Even in the case of such an optimistic scenario, concerning the reactions to the publication of the stress tests, the hopes in the resumption of the lending process in Europe will not yield any concrete results, because a good capitalization of the banking system is only a necessary condition, but it is not enough. The main problem remains the overleveraging of bank customers, whether it's individuals, companies or governments". 

EMILIA OLESCU (Translated by Cosmin Ghidoveanu)
     According to the lawyers of Linklaters, the major European banks have raised 34.7 billion Euros this year, 32% more than they did in the 12 months that have preceded the stress tests of 2011, according to Agerpres. Italian banks rank first, with a total of 10.5 billion Euros, followed by the Greek banks - of 3.8 billion Euros, and the German banks - with 6.7 billion Euros.
     Linklaters predicts that some banks will fail the ECB tests because only approximately a quarter of the 66 banks which are considered as undercapitalized were successful in raising additional funds this year. However, the lawyers expect the banks that will not pass the ECB tests to be granted a 6-month reprieve to raise new funds or to spin-off assets.
     Shares of "Erste Group Bank" AG Austria fell 1.2% yesterday, while those of "Alpha Bank" AE in Greece fell 0.8%, and "Eurobank Ergasias" SA were down 2.4%. Shares of "Piraeus Bank" fell almost 4%. In Italy, shares of "Banco Popolare" SC fell 0.9%. On the other hand, the shares of "Monte dei Paschi di Siena" SpA rose 3.8%, and those of "Banca Popolare di Milano" Scarl - rose 1.1%. Shares of "Dexia" SA remained unchanged over the previous day.
     The ECB will take over the banking oversight activity starting in November 14th, 2014.
     Sociologist Mirel Palada says: "We shouldn't be causing panic among the population with this kind of news. It's true that we should be concerned with the results that the ECB will see with the stress tests, but not as much as we are trying to be persuaded to. Also, in terms of the physical number of banks, there are 11 of them, according to the news in the press, out of a number of thousands, because it is clear that the ECB has conducted these tests only on banks that it has recorded as troubled. In terms of the capitalization, the effect of these banks running into problems would be minimal, perhaps even residual, and it makes no sense to scare people with such sensationalist news just because the ECB may have found no more than 11 troubled banks.
     What happened in Cyprus is not the best example for using in a comparison, because Cyprus was a tax haven and there was no mirroring of the country's economic power. From a financial point of view, Cyprus was completely different. We can't compare it to Europe's financial health.
     The 11 banks that may have problems, according to the information in the mass-media would represent approximately 0.1% of the total banks in Europe and, if this percentage were problematic, then that means that 99.9% of the banks are healthy, which means that this a positive, powerful result, a sign of financial European solidity".