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ECB stress tests show two Italian banks need more capital - ING

FXStreet (Łódź) - Paolo Pizzoli from ING comments on the ECB comprehensive assessment of EU banks which revealed that two Italian financial institutions, Banca MPS and Banca Carige showed capital shortfalls of € 2.111B and €0.814B, respectively.

Key quotes

"Yesterday the board of Banca Carige met and announced a €500bn capital increase and the sale of its insurance, private banking and consumer credit units. Banca MPS did not announce fresh measures over the weekend, but will have to do so within the next two weeks."

"The two banks will have to implement capital measures to cover the shortfalls within 9 months."

"Looking at the Italian overall performance, the results of the comprehensive assessment are relatively reassuring."

"According to the Bank of Italy data, if the banks who failed the assessment have an €2.9bn capital shortfall, the other thirteen have €25.5bn of capital in excess of the threshold."

"Should the assessment’s results be received positively by investors, a private market solution to the capital shortfall would be likely found."

"In principle, the comprehensive assessment’s results should have created better conditions for the credit cycle to pick up also in Italy. However, there is no guarantee that such an acceleration will materialise soon."

"On the one hand, banks who just passed the assessment will likely remain under pressure to strengthen further their capital position to create a safety buffer. On the other hand, lending activity will be crucially depending on credit demand coming from recession battered businesses and households, whose confidence has resumed declining over the Summer months."

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