Unprepared: Crisis Bank Monte dei Paschi loses seed capital in stress test | newsletter

In the latest stress test by the European Banking Authority (EBA), the institute’s core capital ratio plunged into the red in a simulation of a three-year crisis, results published Friday evening showed. This is one reason why the Italian banks examined are among the 50 weakest financial institutions in the test – behind the German ones and just before Ireland’s bottom.

In Banca Monte dei Paschi of the Italian city of Siena, which has been faltering for a long time, the core capital ratio in the considered crisis scenario drops from 9.86 percent at the end of 2020 to minus 0.10 percent at the end of 2023. Comparative: the European average, the rate decreased In banks from 15.0% to 10.2%.

Tier 1 seed capital represents a buffer zone in times of crisis. At Monte dei Paschi, this is already as small as the average in other banks at the end of the simulated crisis. The main Italian bank UniCredit is currently exploring the possibility of taking over its domestic competitor. UniCredit came out of the stress test better with an equity ratio of 9.22 percent.

On average, Italian banks reach a core capital ratio of 8.6 percent in the 2023 stress scenario. Irish institutes report a slight decrease at 8.44%, and German institutes are up slightly at 8.78%. French banks did about one percentage point better at 9.72 percent, but they are also below the European average. So, local bank Société Générale came out with 7.54 per cent, and therefore only marginally better than Deutsche Bank.

Norway ranked first among the countries in the test, as it was a non-EU country, with an average of 17.02 percent. However, the EBA has only checked one bank there. Among the banks in the European Union, Swedish institutions performed better with an average of 16.12%. Moderators didn’t set a minimum quota this time either. Basically, banks couldn’t fail this year’s stress tests.

Frankfurt / Siena (dpa-AFX)

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