Europe's 91 Potentially Bad Banks

Thursday, July 08, 2010

After weeks of intra-Eurozone haggling the Committee of European Banking Supervisors (CEBS) has finally published the list of 91 banks currently undergoing stress tests whose results are eagerly awaited for July 23.
The 91 banks (list below) represent 65% of Europe's banking business, in itself an indication that domino theories, where one failure will lead to others, may develop into a harsh reality, keeping Europe's extensive cross-border business in mind.
Such scenarios do not appear to be part of the stress tests which display a silk glove, business-as-usual approach. The CEBS lifted the curtain only an inch wide, saying,
On aggregate, the adverse scenario assumes a 3 percentage point deviation of GDP for the EU compared to the European Commission’s (EC) forecasts over the two- year time horizon. The sovereign risk shock in the EU represents a deterioration of market conditions as compared to the situation observed in early May 2010.
The EC spring forecast talks of 0.9% GDP growth in 2010 and 1.5% in 2011. (Find country data here.)
This may still be too positive as most recent growth data for H1 2010 show. Eurostat reported on Wednesday that,
Euro area (EA16) and EU27 GDP both increased by 0.2% during the first quarter of 2010, compared with the previous quarter, according to second estimates... 
In comparison with the same quarter of the previous year, seasonally adjusted GDP rose in the first quarter of 2010 by 0.6% in the euro area and by 0.5% in the EU27, after -2.1% and -2.3% respectively in the previous quarter.
So we conclude that the adverse scenarios will nevertheless not reserve for more than a 2% economic contraction, a still very optimistic assumption given the underperformance of Europe in the first half of 2010.

According to the CEBS,
The exercise is being conducted on a bank-by-bank basis using commonly agreed macro-economic scenarios (baseline and adverse) for 2010 and 2011, developed in close cooperation with the ECB and the European Commission.
These peanuts of information raise more questions than they answer. Recalling the ECB's stance of moderate inflation expectations and therefore low interest rates it is exactly the yield scenario that is the tipping point of all stress tests.
Reuters came up with more details regarding haircuts and valuations, citing banking sources:
Two German banking sources said a markdown of 16 to 17 percent off the market price would be applied to Greek debt. Greece's 10-year bonds are trading at about 75 percent of their par value at present.
No markdown would be applied to German sovereign bonds, the sources said, and a 0.7 percent markdown would be applied to French sovereign bonds, one of the sources said.
Government bonds of Portugal, Spain, Italy and Ireland would see more significant markdowns, the sources said.
Wire service Bloomberg reported that a 3 percent loss would be applied to Spanish bonds.
Thursday's ECB meeting will probably confirm this low rate outlook one more time as anemic growth leaves the money printers in Frankfurt no other choice. The ECB can be expected to hold rates at current levels until higher inflation figures will force it to tighten symbolically.
It may be entirely different in the real world, that is those non-bank lenders without access to 1% loans from the ECB. Recent record CDS prices for European government debt and unpublished hiccups in interbank lending may become the breaking point for many of Europe's banks.
Before you scroll to the list of banks included in the stress test, some observations. Banks have long resisted to be named and also resisted that the results will be published on July 23. Spain leads the list with 27 banks taking part, showing the results of the property boom turn bust. Germany's list of contenders includes state-owned banks.
If this is a genuine stress test it can be expected that not only one but maybe a third or more of all banks will be confronted with the gloomy side of things. In 2008 the ECB had criticized that banks' own stress tests were too lax. This one has yet to pass the litmus test.
And here's "the list".
  • Erste Group
  • Raiffeisen Zentralbank (RZB)
  • KBC Group
  • Dexia
  • Marfin Popular Bank
  • Bank of Cyprus
  • Danske Bank
  • Jyske Bank
  • Sydbank
  • Oh-Pohjola Group
  • BNP Paribas
  • Credit Agricole
  • BPCE
  • Societe Generale
  • Deutsche Bank
  • Commerzbank
  • Hypo Real Estate Holding
  • Landesbank Baden-Württemberg
  • Bayerische Landesbank
  • DZ Bank
  • Norddeutsche Landesbank
  • Deutsche Postbank
  • West LB
  • HSH Nordbank
  • Landesbank Hessen-Thüringen
  • Landesbank Berlin
  • Dekabank Deutsche Girozentrale
  • WGZ Bank
  • National Bank of Greece
  • EFG Eurobank Ergasias
  • Alpha Bank
  • Piraeus Bank Group
  • Agricultural Bank of Greece
  • TT Hellenic Postbank
  • OTP Bank
  • Jelzalogbank Nyilvanosam Muködo
  • Bank of Ireland
  • Allied Irish Banks
  • Unicredit
  • Intesa Sanpaolo
  • Monte dei Paschi di Siena
  • Banca Popolare
  • UBI Banca
  • Banque et Caisse d'Epargne de l'Etat
  • Banque Raiffeisen
  • Bank of Valletta
  • ABN/Fortis
  • ING Bank
  • Rabo Bank
  • SNS Bank
  • Poland
  • PKO Bank Polski
  • Portugal
  • Caixa Geral de Depositos
  • Espirito Santo Financial Group
  • Banco BPI
  • Nova Ljubljanska Bank
  • Banco Santander
  • Banco Bilbao Vizcaya Argentaria (BBVA)
  • Jupiter (holds 8 cajas)
  • Caixa (2 cajas)
  • CAM (4 cajas)
  • Banco Popular Espanol
  • Banco de Sabadell
  • Diada (3 cajas)
  • Breogan (3 cajas)
  • Mare Nostrum (4 cajas)
  • Bankinter
  • Espiga
  • Banca Civica
  • Caja de Ahorros y M.P. de Cordoba
  • Caja de Ahorros y M.P. de Zaragoza, Aragon y Rioja
  • Antequera y Jaen (Unicaja)
  • Banco Pastor
  • Caja Sol (2 cajas)
  • Bilbao Bizkaia Kutxa, Aurrezki Kutxa Eta Bahitetxea
  • Unnim (3 cajas)
  • Caja de Ahorros y M.P. de Gipuzkoa y San Sebastian
  • CAI (3 cajas)
  • Caja de Ahorros y M.P. de Cordoba
  • Banca March
  • Banco Guipuzcoano
  • Caja de Ahorros de Vitoria y Alava
  • Caja de Ahorros y M.P. de Ontinyent
  • Colonya
  • Nordea Bank
  • SEB
  • Svenska Handelsbanken
  • Swedbank
  • RBS
  • HSBC
  • Barclays
  • Lloyds Banking


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