European Banking Authority – Stress Tests Hid Full Extent of Sovereign Debt

Concern is rising at the adequacy of the latest round of bank stress tests released on Friday.  For example they only assumed a 15% hit on Greek sovereign debt when the secondary markets assume a 50% hit.

Analysts at Credit Suisse said on Friday said 14 should have failed with a total capital shortfall of €45bn.  18 times the amount that the EBA said the banks that failed needed to raise.


Andrea Enria, chairman of the EBA and other officials of the London-based organisation, fielded questions from analysts angered at what were quickly described as an “inadequate” set of tests.

Mr Enria is understood to have outlined the difficulties the EBA faced in conducting the stress tests on the 91 European banks that took part. He was asked why just nine banks failed, requiring total new capital of €2.5bn (£2.2bn).

The EBA was clear in methodology papers it released on Friday that it had faced great difficulties getting different national regulators and banks to provide accurate data.

Describing the process as “constrained”, the EBA admitted that figures given by the banks in some cases “materially” changed after being challenged.

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