If a lesson to be learned from the financial crisis, it is this: The banks need more capital to cushion failure of management and other mischief. The taxpayer should not have to save it again, that was the promise. They can check the progress by means of the stress test.
In the early hours of yesterday Saturday, the European banking (EBA) has now submitted the most recent result. And as if to suggest the specimens have afterwards praised himself. It was well on the way, according to a joint message of the German financial sector: “Even in this very severe stress scenario show German banks their resilience.”
Really? So all is not well, the oint economy Isabel Schnabel, since the stress test has ignored the biggest stress of bankers: “Major risk factors such as low interest rates have been hidden,” criticizes the economist. It builds that the “market pressures could be stronger than that of the overseer.” Because so casually, as the bankers would have it, the results are not to be interpreted. “European banks are threatening capital gaps up to 20 billion euros in a stress scenario,” warns Philip Wackerbeck, CEO of PWC Strategy. The financial expert expects that the European Central Bank will request in December some banks to capital.
Bitter Embassy of Germany
In 51 banks in Europe, the regulator has examined how they cushion shocks can. We tested about a violent crash of the economy or the slump in property prices
The bitter message from a German perspective. Among the ten most vulnerable banks, there are the two big German houses German bank like Commerzbank, which is why both immediately robustness assure: “Our balance sheet is healthy,” says German Bank Chief risk Officer Stuart Lewis. Marcus Chromik, the risk management board of Commerzbank, says: “We are strong and resistant to stress.”
An unpleasant surprise, it is in any case that the two banks come into focus and that Germany generally on the losing side of the stress test. For the unfavorable scenario, the actual stress, the negative impact on the equity only in Ireland were higher, says strategy consultant Philipp Wackerbeck: “Even Spain and Italy put the better off.”
Not Italian Tradition Bank
the acute need of the Italian tradition bank “Monte dei Paschi” has been known for weeks, in the early hours of Saturday, she has presented a multi-billion dollar rescue plan, just in time before the bank went out with a negative equity ratio of the stress test. The other Italians have performed relatively well, German banks rather weak. Notable exception is the “development bank of North Rhine-Westphalia”, the total reaches number one, but is a special case, with no risk and customer business.
In addition to the upside, the loan books of German companies are solid as at the last test and better than the rest of Europe. This means that the default risk of loans is lower. Furthermore, the German banks have increased in the past two years, their capital.
So What’s poor performance is the stress test? One reason is to be sought in the procedure, another – more dangerous – in principle, more on that later. First to the rules, which explain the lower ranks. Universal banks are treated tends to be worse in the stress test, as the risks of individual regions are added. And above all: The testers have a “behavioral risk” introduced which measures how criminal energy and lack of control can overthrow a consolidated embarrassed: Because it looks bad for the banks in this country
Next catastrophe. happened at another location
the Commerzbank had to shell out the most expensive punishment of their history in connection with Iran-shops in America. The German bank drags a welter of lawsuits behind him, for the resulting expected loss, the Bank has made € 12 billion reserves since 2012, more 12 billion, the reduction of scrap papers cost. “For every billion,” says Executive Lewis, “we would have 0.25 percentage points more equity.” The world would be different.
In fact, a problem of such stress tests is that they extrapolate past, even if everyone is aware that the next catastrophe in the financial sector happened at another location
This brings us to the fundamental, the real problem. the German banks are less profitable than its European competitors. And where no profits are, because there is no equity forms. As simple or as difficult as that. The German bank, which last week reported a meager profit, has already announced tougher austerity measures. Again, this will be enough difficult, as long as the zero lower the core of the business is attacking: collect money and lend to higher interest. That has done in times of negative interest. “Banks will have to proceed more radically,” says PWC man Wackerbeck. “The cost of 10 or 15 percent decrease is not enough.”
The return of the banks are at 6.5 percent on average far below the pre-crisis, as 15 to 20 percent have been achieved, some even from 25 percent have been dreaming. Today is to do with banks no state that investors have long since lost interest in them, such as stock prices prove that the market capitalization of Europe’s banks, measured in the respective asset in the balance sheet has halved from April 2015 to July 2015. This is the true stress for the people in the bank towers.