NEWS FLASH: The European Stress Test Results Didn’t Disclose All Failed Banks!

peoples trust toronto

Stress test 3

Source: CNBC

The much-anticipated stress test results from the Europan Banking Authority (EBA) were published yesterday (and of course, a Friday night right before a weekend is the best way to publish some bad results). In the stress test, the EBA is trying to find how the banks will perform under an adverse economic scenario in the world. Not all banks are being covered, and the 51 banks that have been subject to the test could only be seen as some sort of sample. At best.

Stress Test 1

Source: EBA

4 banks ‘failed’, and one Italian bank even succeeded in ending up with a negative (!) capital ratio under the adverse scenario in the stress test, il faut le faire! Banca Monte dei Paschi has a baseline CET1 ratio of 12.24% in 2018, but its entire capital would be wiped out under the ‘adverse’ circumstances (which aren’t that harsh at all)…

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