8 European Banks Fail Stress Tests

According to a Bloomberg report, Huw van Steenis, a banking analyst at Morgan Stanley, said, “The market had very low expectations for the stress tests. But the EBA’s focus on the 16 banks which were on the cusp of failure, with capital of between 5% and 6%, is a step in the right direction. It’s a very cleverly worded document which puts pressure on national regulators to turn their attention to the banks which just passed.” Had they not raised capital during the first quarter, about 20 banks would have failed, according to the EBA.

Germany, however, was not pleased with the tests after one German bank withdrew itself in the wake of a decision by the EBA not to acknowledge that its capital level had improved. Reuters reported that the association of German savings banks termed the tests arbitrary and politically influenced. The Association of German Banks was equally incensed, calling the decision “not comprehensible.”

Heinrich Haasis, head of the association of German savings banks, was quoted in the report saying, “The European stress test has not contributed toward building trust in a sufficient manner. Arbitrary benchmarks were applied to achieve political goals.”