The name is not the most reassuring, "stress test”, but savers can rest assured: nothing will change for them. The English expression refers to a series of simulations carried out between January and September by the European Central Bank and the European Banking Authority, which hypothesized the worst economic scenarios to verify which banks would be able to resist and which would instead go into crisis. Those who have not passed the exam are obliged by the ECB – which from 4 November will take over the sole supervision of European banks – to strengthen their capital. There are more than one ways forward: capital increases, divestments, bonds, mergers.
WHAT HAPPENED ON SUNDAY?
On October 26, the Eurotower communicated the results of the latest tests: out of 130 European banks examined, 25 did not pass the stress tests, but the ECB specified that 12 have in any case already implemented capital strengthening measures. The others have two weeks to present their plans to the ECB and up to nine months to implement them.
WHICH ITALIAN BANKS ARE INVOLVED?
There are nine Italian institutions that have not passed the exam, but only four still need to raise new capital. Among these are Mps and Banca Carige: the first needs 2,111 billion, while the second will have to find 814 million.
Today, overall, Italian banks have a treasury of 22,6 billion more than the requests of the ECB, even net of the situations of MPS and Carige. The technical rejection of nine institutions is linked to the fact that the Eurotower examination was based on the balance sheet data as at 31 December 2013 and did not take into account the rain of capital increases and bonds produced in recent months by Italian banks .
If these operations are also included in the calculation, five of the nine rejected institutions are saved: Banco Popolare, Bper, Creval, Veneto Banca and Banca Popolare di Sondrio. For two others, Bpm and Banca Popolare di Vicenza, the measures already being approved will suffice.
WHAT CHANGES FOR THOSE WHO HAVE ACCOUNTS IN REJECTED BANKS? WILL THERE BE CONSEQUENCES ON THE LOANS?
Bank of Italy ensures that even the institutions rejected by the ECB have adequate capital: they are solid, they are not in danger. The consequences of the stress tests will rather be felt at the level of corporate strategies: a banking risk of mergers and assignments may begin, but customer deposits and savings are safe.
As for loans, it is true that the need to deal with the ECB's checks and the need to clean up risky loans from balance sheets has further increased the prudence of banks in granting credit. However, the ECB has ensured that now, having made the system transparent, credit will begin to flow back to businesses and households.
WHERE WILL MPS AND CARIGE GET THE NECESSARY MONEY FROM?
The Treasury Minister, Piercarlo Padoan, said he was confident that Italian banks will meet these needs "with market operations". Translation: this time the state shouldn't put a single euro on the plate.
Ps
Fabrizio Viola, CEO of Mps, "categorically" ruled out that the Bank could resort to public aid again, specifying in an interview with Il Sole 24 Ore that the Sienese institute is evaluating "all options, even a merger", having no ongoing negotiations. On the other hand, according to some sources, Montepaschi is considering the possibility of delaying the repayment of the Monti bonds that have not yet been repaid (equal to approximately 760 million euros), perhaps by converting its debt into shares to give to the state. The path of the capital increase is more difficult, considering that to successfully conclude the latest operation of this type, MPS had to appeal to two foreign investors (Brazilian and Mexican) who now control the bank together with the MPS Foundation with a 9% stake capital
Carige
As for Carige, on 26 October the Genoese bank announced that it had unanimously approved a plan to be submitted to the approval of the ECB which envisages a capital increase of at least 500 million guaranteed by Mediobanca, in addition to other sale of assets. Two days later Carige announced an agreement to sell its insurance business to Apollo Management Holdings for €310m.
HOW DO STRESS TESTS PENALTY THE REAL ECONOMY?
In portraying the most adverse scenarios, the ECB assumed a nightmare scenario, completely unrealistic for the real economy (Italian GDP -6,1% in three years, -7,6% for Germany), but did not the same with the financial markets, subjected in the simulations to a decidedly lower "stress". Result: German and French banks, decidedly more exposed to the derivatives market, have had an advantage over Italian and Spanish institutions, which give more room for credit to the real economy.
