EU banks broadly resilient to EBA's severe scenario in 2016 stress tests - Moody's

Moody's notes that EU banks continue to be broadly resilient to EBA's severe scenario in 2016 stress tests.

Headlines

The European Banking Authority's (EBA) 29 July stress test results show that most European Union (EU) banks prove to be resilient under adverse conditions
Marking a significant improvement upon the results of the EBA's similar test in 2014

The EBA's 2016 EU-wide stress test exercise covered 51 European banks and highlights potential capital pressures under both mild and severely stressed economic conditions

The results will inform the Supervisory Review and Evaluation Process (SREP), the European regulators' annual in-depth evaluation of each bank's risk exposure. This, in turn forms the basis of supervisors' decisions on bank-specific minimum capital -- or Pillar 2 -- requirements.

Only one bank of the tested sample, though, had a negative CET1 in the adverse scenario -- Italian lender Banca Monte dei Paschi di Siena S.p.A (MPS)

Moody's notes, however, that Italian banks had very different outcomes in the test. The Italian banks' stressed CET1 ratios in the adverse scenario range from -2.2% for MPS, to 10.2% for Intesa Sanpaolo SpA. Four of the five participating banks show results above 7.0% and are within Moody's expectations for this group.