Yesterday, the Committee of European Banking Supervisors (“CEBS”) presented the results of a European Union-wide forward-looking “stress tests” of the banking system to the ECOFIN Ministers and Governors. Unlike the Supervisory Capital Assessment Program Results released by the Federal Reserve in May, which made specific recommendations for the individual bank holding companies that had been assessed, the EU-wide stress test results only discussed results on an aggregate basis.
According to the presentation, if current macro-economic projections are correct, the 22 major European cross-border banking groups that were analyzed will have, in the aggregate, Tier 1 capital ratios in excess of 9%, which greatly exceeds the Basel minimum requirement of 4%. Even if economic conditions are worse than is currently expected, the aggregate Tier 1 ratio for the banks would remain above 8%, with none of the banks in the sample having a Tier 1 ratio below 6%.
CEBS stated in its press release that the “resilience of the banking system reflects the recent increase in earnings forecasts and…the important support currently provided by the public sector to the banking institutions, notably through capital injections and asset guarantees.”