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25 Banks Just Failed Europe's Biggest Ever Health Tests

Mario Draghi sad faceREUTERS/Ralph OrlowskiEuropean Central Bank President Mario Draghi speaks during a monthly ECB news conference in Frankfurt.

25 of Europe’s biggest banks just failed the Eurozone’s first united health check (out of 130 in total).

In short, 25 banks are short of a total of €25 billion ($US31.67 billion), and the overall impact on them runs to €62 billion ($US78.55 billion). It’s pretty much in line with reports that were leaked to Bloomberg at the end of the week. 

But 24 banks failed the European Banking Authority’s stress tests, the names of which are below. That’s more than was expected earlier this week. 12 of those have already raised the required capital to cover their shortfall, but 13 haven’t. Those banks need to raise another €9.5 billion ($US12.94 billion)

Here’s the breakdown from the ECB:

  • Capital shortfall of €25 billion detected at 25 participant banks
  • Banks’ asset values need to be adjusted by €48 billion, €37 billion of which did not generate capital shortfall
  • Shortfall of €25 billion and asset value adjustment of €37 billion implies overall impact of €62 billion on banks
  • Additional €136 billion found in non-performing exposures
  • Adverse stress scenario would deplete banks’ capital by €263 billion, reducing median CET1 (common equity tier 1, a common definition of a bank’s core financial strength) ratio by 4 percentage points from 12.4% to 8.3%

So far the reaction seems to be divided. On Twitter, analyst Dan Davies thinks the results are undoubtedly bullish. In comparison, economist Phillipe Legrain says the low level of capital that now needs to be raised means the tests were a whitewash

Below is a full list of all the banks with a shortfall:

ECB stress testsECB

The European Banking Authority’s Stress tests are worse than some reports suggested. 24 banks failed the “adverse scenario” tests, including nine from Italy alone.

Reports Wednesday suggested that only 11 banks would fail. Here’s the full list:

Screen Shot 2014 10 26 at 11.29.19EBA

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