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Sunday, October 26

26th Oct - ECB's Comprehensive Assessment

Previously on MoreLiver’s:

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Press releaseECB
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 * A diverse stress scenario would deplete banks’ capital by €263 billion, reducing median CET1 ratio by 4 percentage points from 12.4% to 8.3%

Comprehensive AssessmentECB
Aggregate ReportECB

Final Results Press ConferenceECB

Press conference Danièle NouyECB

How the European Stress Tests WorkedWSJ
Quicktake: Stress Tests - Restoring Faith in BanksBB

About 25 Eurozone Banks to Fail ECB Stress TestsWSJ
List Includes Italian Banks but None From Germany or France

ECB Announces Stress Test Results: Here Are The 25 Banks That FailedZH

ECB Stress Tests: How Good Were Banks at Valuing Their Assets?WSJ

25 European banks fail stress test, 12 have fixed holes alreadyReuters
ECB Test Shows 25 Billion-Euro Capital Gap at Euro BanksBB
25 Banks Just Failed Europe's Biggest Ever Health TestsBI
Twenty five of the euro zone's 130 biggest banks have failed a landmark health check and ended last year with a collective capital shortfall of 25 billion euros…A dozen of those banks have already addressed the gap by raising 15 billion euros over the course of this year.

A Country-by-Country Breakdown of the Stress Test FailsWSJ

Nine Italian banks fail EBA stress testsFT

Here Are the European Banks That Failed the Stress TestsWSJ

The ECB banking stress tests explainedNot a Yes Man

Now the Stress Tests Are Over, Can the Eurozone Economy Be Fixed?WSJ

ECB Review Marks End of Europe Banking Crisis, Dijsselbloem SaysBB

ECB Fails 25 Banks as Italy Fares Worst in Stress TestBB

ECB fails 25 banks in stress test, but capital needs lowReuters
Roughly one in five of the euro zone's top lenders failed landmark health checks at the end of last year but most have since repaired their finances, the European Central Bank said. 

ECB's Constancio says sees slight pick-up in loan demandReuters

Monte Paschi has biggest capital gap in ECB tests, may seek mergerReuters

Eurobank, National Bank Plans May Cut Capital Gap to ZeroBB

Yet another eurozone bank whitewash Philippe Legrain
Even if you take the ECB at its word, the exercise is not comprehensive, nor are the stress tests particularly stressful.

Europe’s Good-Enough Bank Stress TestsWSJ
The trick for the ECB was to make the tests difficult enough that markets see them, and by extension bank-balance sheets, as credible, without producing so dire a result that it raises fresh doubts about the financial sector

Euro area: Stress tests behind – not the stressNordea
Beyond doubt this was a more credible stress test than similar exercises done before and the remaining capital needs seem manageable. Banks in the stagnating Euro-area economies may now be more willing to lend, but other obstacles remain. The macro environment will continue to be challenging. There is likely to be some relief in markets in the form of higher equity prices and core bond yields on Monday. Italian bonds should feel some pressure vs Spain and Belgian ones compared to France.

Analysts comb the data for clues to banks’ healthFT
Ramifications of complex Asset Quality Review could take weeks or months to become clear

ECB stress test: The data for each bankFT
This sortable table shows a summary of the results of the stress test, including any shortfall after net capital raised since December 2013 is taken into account.

ECB says banks overvalued assets by €48bnFT

Roman bankers protest at stress test resultsFT
Analysts and investors have taken the howls of protest from Italian central bank officials on Sunday as evidence that the European Central Bank’s health check on the continent’s banking system is sufficiently tough.

Capital shortfall less than expectedDanske Bank
The result of the ECB’s Asset Quality Review (AQR) and stress test, including the fact that 12 out of the 25 have already covered their capital shortfall, is better than feared. Importantly, there were no major banks failing the tests. It should overall reduce tail risk from the banking sector.

Inflation outlook that crushes all credibility of the ECB's stress testZH

The Scariest Number Revealed Today: $1.114 Trillion In Eurozone Bad DebtZH

Statement by the IMF Spokesman on the ECB’s Comprehensive AssessmentIMF

Another Unbelievable Stress-Free Test; Whitewash Math and Deferred Tax AssetsMish’s
In an effort to fool the public into believing the latest round of bank stress tests were actually designed to find stress, the ECB found 25 scapegoats, with the biggest losers in Italy and Greece.

Europe’s Banking Union starts on an encouraging noteBruegel
If all goes according to plan, it may unlock some of Europe’s repressed growth, by allowing most banks to lend more freely now that their creditworthiness has been duly checked.

Europe's bank test celebrations mask mounting challengesReuters
Investors were spared immediate pain on Sunday after the ECB's landmark banking health check did not force massive capital hikes amongst the euro zone's top lenders. But the sector's long-term attractiveness has been damaged by revelations of extra non-performing loans and hidden losses that will dent future profits.

ECB List of Failing Banks Shrinks If You Read Small PrintBB
Most of the lenders that failed the European Central Bank’s balance-sheet test have been let off for good behavior.

EU Stress Test Shows How Capital Rules Give Room to HideBB
The EBA used EU rules as applicable over the three-year horizon of the test. These give national supervisors scope to allow banks to count instruments whose eligibility as core capital will be gradually eliminated over the next four years. Had the fully phased-in EU rules been applied, the number of failures would have increased to 34.

ECB Stress Test Fails To Inspire Confidence Again As Euro Stocks Slide After Early Rally; Monte Paschi CrashesZH

European Stress Test Results – Both ‘Worrying and Reassuring’WSJ
While no major banks in the eurozone failed the tests, 13 of the continent’s banks were instructed to raise capital in case they needed to ride out another economic storm. Other big lenders cut it close, though.

The marathon has only just begun - what will come after the stress test?BIS
Opening statement by Dr Andreas Dombret, Member of the Executive Board of the Deutsche Bundesbank, at the press conference following publication of the comprehensive assessment results, Frankfurt am Main, 26 October 2014.

Lex Live: European banks after the AQRFT

ECB stress tests are not grounds for complacencyFT

Tough New Rules Would Have Caused Ten More Stress Test FailsWSJ
Ten more banks would have failed stress tests performed by European supervisors if stricter rules on the assets allowed for calculating capital buffers were already in force.

When Stress Tests Fail - Italian Banks Are CollapsingZH

European Banks: Balance Sheet Clarity But A Cloudy FutureCFR
The asset quality review (AQR) at the core of the exercise identified valuation problems at 130 banks, resulting in a markdown of the balance sheet by €48 billion. The ECB blamed poor valuation of commercial loans for much of the problem. It further criticized national regulators for underreporting non-performing loans (NPL) by €136 billion.

Is Italian Banks’ Problem Italy?WSJ

Will Banking Union™ Finally Deliver for the Eurozone Economy?WSJ
Now that European authorities have completed their reviews of bank balance sheets, are the banks ready to lend?

Comprehensive Assessment shows broad resilience of euro area banksMoody’s

The ECB's Asset Quality Review: Stressful testsThe Economist
Europe’s banks have been probed. More than expected have been found wanting

Alternative stress tests find French banks are weakest in EuropeFT
Measure based on market capitalisation says they are most risky

Italy rules out public money for banks that failed stress testsFT
The big question swirling around Rome and Milan in the aftermath of the stress tests is to what degree the exercise will now trigger a round of consolidation – not just involving MPS but also beyond, to include many of the midsized weak Italian banks known as the “popolari”. But it is unclear whether this could happen without the government funds to facilitate deals that Rome appears to be ruling out for now.

Bank stress tests fail to tackle deflation spectreFT
Economists’ criticism of the examination focused on the stress tests’ failure to consider one of the biggest threats to the eurozone economy: the risk of a severe bout of deflation.

Bank shares lose early gains after ECB stress testsFT

Alternative stress tests find French banks are weakest in EuropeFT
Measure based on market capitalisation says they are most risky

ECB Stress TestsGlobal Macro Trading

Errors Found In The ECB's "Confidence-Boosting" Stress TestZH

ECB stress test a halfway house for lifting bank capital TradingFloor
The ECB's comprehensive assessment of banks concluded last Sunday and financial markets will present their own estimates. Bank mergers and continued low lending is the probable outcome, and ECB's supply of liquidity is not helping - only asset purchases will.

ECB stress tests vastly understate risk of deflation and leverageThe Telegraph
Ignoring the deflation danger for the banking systems of southern Europe has reduced the latest stress test to another 'farce', says EU economist Philippe Legrain

Stress tests alone will not bring the eurozone back to healthFT
Gavyn Davies: A dysfunctional banking system should no longer be fatal for growth

Interactive: ECB bank test resultsReuters Graphics

Sunday Bloody SundayBruegel
A gloomy Italian banking system which has been spared - until now - from the deeper monitoring and restructuring that have been undergoing in Spain and other programme countries, but at the cost of finding itself stuck in a limbo where lack of capital (in some cases), low profitability (in general) and rising bad loans are hindering credit and therefore further harming the potential recovery.

[video] Martin Wolf on Europe's bank stress testsFT
Martin Wolf gives his verdict on whether the recent EU-wide stress tests on banks and the asset quality review will mark a turning point in the bloc’s crisis, and outlines what’s needed for a sustainable recovery in the eurozone

[audio] Money talks: A mixed bill of healthThe Economist

Making sense of the comprehensive
The analyses suggest possible capital shortfalls between €80 billion and more than €700 billion depending on the model....regulatory stress test outcomes are potentially affected by the discretion of national regulators.

AQR research pack (registration required) – Longroom FT
SocGen AQR & Stress tests in 10 slides – Time to move on
Deutsche Bank: All major banks pass, job done
Deutsche Bank: On to the test which matters more
Credit Suisse: A step in the right direction
Morgan Stanley: After the AQR – remain overweight banks
Danske Bank: Capital shortfall less than expected

ECB stress tests: The view of an insider – Guest post by Klaus KastnerYanis Varoufakis
Anyone who concludes that the EZ financial system is on solid grounds is living in an illusion. The leverage of the large banks (mostly German and French) is far too high and they are far too reliant on ‘hot money’ for their refinancing.

Whither Europe’s Banks after the Stress Test?PIIE
The tests underscored concerns that many banks will need more capital and a more profitable business model to survive in the future. By itself, the comprehensive assessment is unlikely to spur growth in the euro area, though some financial market fragmentation should be eased.

Europe's Many Banking ProblemsEconmatters
These tests were only the beginning of a complex process to build a banking union in the European Union. Unlike the stress tests, the next steps in this project could create more divisions in Europe because national parliaments will be involved at a time when Euroskepticism is on the rise. More important, the stress tests will not have a particular impact on Europe's main problem: tight credit conditions for households and businesses. Without a substantial improvement in credit conditions, there cannot be a substantial economic recovery, particularly in the eurozone periphery.

The Stress Test Results Are In – And It’s Trebles All Round!Alpha Now
Our own calculations suggest that equity-market pricing values bank assets at more than a trillion less than their book value, an order of magnitude different from the ECB’s estimates.

Europe’s Stress Test: Good, but Not EnoughMoody’s
The stress tests probably were not rigorous enough to significantly alleviate banks’ reluctance to lend more, at least not any time soon.

Kauppi: Pankkiunionin lähtölaukaus ammuttuFK
Finanssialan Keskusliiton (FK) toimitusjohtaja Piia-Noora Kauppi korostaa, että tänään julkistetut eurooppalaisten pankkien kattavan arvioinnin tulokset ovat lähtölaukaus 4.11. toimintansa aloittavalle euroalueen pankkiunionille. Euroopan keskuspankin (EKP) tekemä kattava arviointi vahvistaa tiedot suomalaisten pankkien hyvästä kunnosta. Finanssivalvonta totesi syyskuun lopulla, että Suomen pankkisektorin vakavaraisuus on vahva. Alan kannattavuus on parantunut heikosta taloustilanteesta huolimatta.

Pankkien stressitestit julki: 25 pankkia reputtiYLE
Yhteensä 13 pankkia on reputtanut Euroopan keskuspankin tekemät pankkien stressitestit. Kaiken kaikkiaan 25 pankilla havaittiin vajeita pääomassa, mutta 12 pankkia on jo tehnyt asian eteen jotain, EKP kertoi sunnuntaina.

Suomalaispankit selvisivät EKP:n testeistä kuivin jaloinYLE
Euroopan keskuspankin kuntotesteissä oli mukana 128 pankkia. Suomesta mukana olivat isoimmat pankit, eli OP-Pohjola sekä Nordea ja Danske Bank.

Urakka ohi: Pankeilta puuttuu 10 miljardia euroaTalSa
Eurooppalaispankkien taseissa on miljardien aukko, Euroopan keskuspankin ja pankkiviranomaisen selvitykset paljastavat, eivätkä kaikki pankit läpäise stressitestejä. Suomalaispankit sen sijaan selviäisivät rankemmastakin kyydistä.

Suomi-Nordea sai erikoiskohtelunTalSa
EKP syynäsi Nordealta myös johdannaiset, toisin kuin OP-Pohjolalta ja Danske Bankilta.

Suomalaispankkien vakavaraisuus säilyi hyvänä myös stressiskenaariossaFiVa

EBA:n stressitesti: Nordean asema on vahvaNordea

OP-Pohjola-ryhmän riskinkantokyky vahva EKP:n kattavassa arviossaOP

Danske Bank: Stressitestillä saadaan kaikki samalle viivalleMTV

Rinne: Pankkien stressitestit tärkeä osa yhteisiä pelisääntöjäMTV

Rehn: Ongelmapankit tuskin tarvitsevat veronmaksajien apuaMTV

Stressitestit, luotonanto ja euromaiden taloustilanneRoger Wessman

Suurpankkien stressitestit taas talousteatteriaJan Hurri / TalSa
Euroalueen suurpankkien stressitestit olivat aiemmin silkkaa talousfarssia. EKP on juuri saanut päätökseen entistä perusteellisemmat ja entistä vakavammat pankkitestit. Ehkä ne eivät olleet enää farssia, mutta talousteatteria kuitenkin. EKP:n asema esti aidosti riippumattoman ja ankaran riskianalyysin.