Remember how we were all told that Europe’s financial system is fixed? Not by the looks of the latest ECB report detailing how 25 (out of 130) failed the recent health test. So not only do we have to deal with the Fed talking this weekend, relatively high equity valuations, a struggling global economy, you can now add Europe’s banks still being in rubbish conditions to the mix.
See below for the highlights and a list of the banks that are struggling:
- Capital shortfall of €25 billion detected at 25 participant banks
- Banks’ asset values need to be adjusted by €48 billion, €37 billion of which did not generate capital shortfall
- Shortfall of €25 billion and asset value adjustment of €37 billion implies overall impact of €62 billion on banks
- Additional €136 billion found in non-performing exposures
- Adverse stress scenario would deplete banks’ capital by €263 billion, reducing median CET1 ratio by 4 percentage points from 12.4% to 8.3%