European banks in the spotlight amidst stress tests – Reuters

As reported by Reuters, major European banks are going to be seeing results from the EU’s latest stress tests.

Key highlights

The European Banking Authority (EBA) will be dropping their latest stress test results at 17:00 GMT Friday, claiming that this was their toughest round of testing since the practice began in 2009.

While the EBA maintains there is no strict pass/fail mark, financial supervisors determine whether or not capital institutions are holding enough cash to cover potential losses. Alongside Italian banks, analysts are expecting that Deutsche Bank, Germany’s largest institution, will be watched closely by readers of the test results following three straight years of losses on the books.

The current round of tests were meant to judge banks’ ability to withstand specific market shocks, including political uncertainty amidst continued economic slowdown, a no-deal Brexit, or a broad-base  sell-off in government bonds.

Europe’s banks still lag U.S. counterparts in profitability, quality of loans and cost discipline and the region’s banking index .SX7P has lost more than 20 percent this year. Thirty-three of the banks in the test are in the euro zone, where the main supervisor is the European Central Bank, which is separately testing a further 60 smaller banks. Some of these are struggling, but their results will not be published. – Reuters