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ECB bank stress tests result better than feared - Danske

FXStreet (Łódź) - The Danske team of analysts point out that the outcome of ECB's AQR and stress tests of European banks was more positive than expected as no major financial institutions failed them.

Key quotes

"It should overall reduce tail risk from the banking sector."

"The ECB only sees EUR9.4bnin capital shortfall on an aggregate level, which should be considered positive. Italy and Greece have the largest shortfalls but the latter is already managed by the European Commission’s restructuring plans."

"For Italy, nine out of 15 supervised banks have a capital shortfall as of end-13 and adjusting for net capital changes throughout 2014 this still leaves four banks with a total capital shortfall of EUR3.3bn."

"The limited capital shortfall in the euro area reflects that banks have already raised capital in anticipation of the comprehensive assessment and going forward shortage of bank capital should be a smaller headwind for credit creation and economic activity."

"The stress test should be deemed credible as the adverse scenario implies a reduction in the median CET1 of 4pp. Compared to previous tests this is tough."

"We expect the release of the AQR and stress test to bring some relief to the markets as the exercise has been a concern throughout this year and the results are better than feared, while the stress test should still be considered tough."

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