“Stress test of European banks is not strict enough” – NU.nl

According to economists the scenarios that have been passed on in the test only consider a “relatively mild” economic downturn. A crisis as severe as that was not included in 2008, causing a “distorted image” arises from the claims.

Friday published the European Banking Authority (EBA) the results of the stress test. The regulator concluded that most large banks in Europe are able to absorb new financial failures.

Capital Buffers

But Dutch economists think otherwise apparent from inquiries by NU. viz. “We should not forget that the capital buffers of banks are still very low historically,” said Tilburg Professor of Banking and Finance Harald Benink.

“Previously, banks had capital buffers of around 15 percent. Now they are between 3 and 4 percent. According to the stress test buffers fall less quickly, but it we should not derive any false security. Banks are still vulnerable. “

For mild

the Rotterdam professor of Economics Ivo Arnold calls the scenario that has passed the stress test “relatively mild”. According to Arnold, the EBA should conduct a much more rigorous test by also counting heavier crisis scenarios.

“The European regulator is now quite positive about most banks. But when you see a pretty average scenarios already quite big hits cause, you might wonder what happens when a really serious crisis, like the one in 2008. I think had shown passing thereof a different story. “

also, the scope of the stress test to be limited according to Arnold. As Greek and Portuguese banks were not included, because they are too small. “While it is now correct weak countries. We now know not how the banks could respond to a crisis.”

This year, the 51 largest European banks were subjected to the test. According to the European Central Bank (ECB) they include a total of 70 percent of the banking sector in Europe. In 2011 and 2014, when a stress test was performed, more banks were taken.

Monte dei Paschi

Ensure Child continues according to economists, the Italian bank Monte dei Paschi. The stress test showed that the oldest bank in the world, who have been working in finds dire straits, would go completely slicing economic adversity

Friday made the Italian bank to take all known measures. There will be a capital injection five billion and bad loans worth nine billion could be transferred to other banks.

in itself not a bad idea, says professor Benink, but it is questionable whether the measures succeed. “All Italian banks have problems. If they take loans, they do not get hit? And is the Italian government finally guarantee? If so, there is State aid and it is questionable whether you do it this way can solve. in the coming days, the discussion going. “

you may also wonder what is the purpose of such a stress test, says his colleague Ivo Arnold. “Is it really for the claim, or is it more radiating a matter of trust? The results of this test are the financial sector, of course, good. It suggests that it goes well. That gives banks little incentive to increase their capital buffers, whereas indeed needed “

By:. NU.nl/Susanne Geuze