Understanding the 2016 European Banking Authority Stress Test Results

2016 European Banking Authority Stress Test Results

Our experts have produced a commentary to better understand the European Banking Authority Stress Test results.

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Understanding the 2016 European Banking Authority Stress Test Results

The 2016 Stress Test confirms stronger capitalisation across the sector, yet Price-to-Book ratios are at almost unprecedented lows. There is a tension between the Stress Test results and the market’s view of sector strength, which has yet to be resolved.

 

Key takeaways

  • The difference in capital impact between the base and adverse scenarios is significantly greater in 2016 than in 2014. 
  • European banks appear to be in a more stable position than they were in 2014. Overall, the Banks have increased their aggregate stock of capital, both in terms of quality and amount, which we regard as a clear indicator of a more stable and resilient banking system. 
  • UK bank results were in line with the European average, RBS and Barclays saw the largest CET 1 ration impact from thus group.
  • Only 4 banks fared worse in the adverse scenario of the 2016 Stress Tests than I the adverse scenario of the 2014 Stress Tests.

 

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