SPAIN: Spanish bank will pass stress test says Bankinter board member

Record ID: 561212

  • Title: SPAIN: Spanish bank will pass stress test says Bankinter board member
  • Date: 24th July 2010
  • Summary: NEWSPAPERS "EL PAIS" NEWSPAPER FRONT PAGE OF "EL PAIS" WITH HEADLINE, READING: "VARIOUS SPANISH SAVINGS BANKS ARE SUSPENDED DURING THE STRESS TEST" ARTICLE INSIDE "EL PUBLICO" WITH HEADLINE, READING: "SPANISH BANKS GET MORE NAKED THAN OTHER EUROPEAN BANKS TODAY" "EL MUNDO" BROADSHEET WITH HEADLINE, READING: "DOUBTS OVER THE STRESS TEST METHOD" NEWSPAPERS
  • Embargoed: 8th August 2010 13:00
  • Keywords:
  • Location: Spain
  • Country: Spain
  • Topics: Finance
  • Reuters ID: LVA8IFBVO0MDAGXML82AZ318I3N4
  • Story Text: Board member of Spanish bank Bankinter, David Perez Renovales, said on Friday (July 23) he was confident Spanish banks will show good results from the stress test.
    Speaking hours before the results are officially released; Renovales said Spain's extra transparency would help the country recover market confidence.
    "I think that the Spanish government as well as the Bank of Spain has been very strongly committed with the stress test. So, and they have thought that it should be a very good exercise for the entire Spanish financial system. So it should be very helpful for the Spanish financial institutions to recover confidence and to recover the accessibility to the financial markets," he said.
    Europe's attempt to restore confidence in its banks comes to a head on Friday with widespread expectation that up to 10 lenders will fail the exam and have to raise capital.
    Regulators have been looking at how banks would withstand another recession in an exercise similar to one in the United States last year, which helped restore bank sector confidence.
    "I think the results are going to be pretty good for the entire Spanish financial system. I think that some of the institutions that should have some problems in the past are already in the process of restructuration and merging or having some alliances. And they have already asked for some additional capital contributions from the FROB (Fund for Orderly Bank Restructuring). So, all the institutions should have, I think, good results from the stress test," said Renovales.
    Europe is testing 91 banks on how they would cope with another economic downturn and losses on some government debt in an effort to restore confidence after the Greek crisis hit markets and sparked fears the eurozone could unravel.
    According to a document sent to banks and seen by Reuters on Wednesday (July 21), banks must estimate how much more capital they might need to achieve a Tier 1 capital ratio of 6 percent under the scenarios.
    They have been asked to estimate their Tier 1 capital ratio at the end of 2011 under a base scenario, an adverse scenario including two years of economic deterioration, and an adverse scenario with an "additional sovereign shock".
    The document asks banks to estimate their total Tier 1 capital and their Tier 1 capital ratio at the end of 2011 under each scenario.
    The test scenarios include a look at how they cope with a moderate recession this year and next and the same scenario with additional losses on government bonds.
    Any bank whose Tier 1 capital ratio falls below 6 percent by the end of 2011 will be regarded as failing the test, according to documents seen by Reuters on Wednesday. Banks would be expected to raise funds to make up the capital shortfall.
    Several Spanish savings banks, including some that have been involved in recent mergers, have failed the tests, Spanish newspaper El Pais reported on Friday.
    Other newspapers highlighted doubts over the stress test method.
    National regulators can vary on what qualifies as standard capital, and there has been concern among some investors that the test may not be evenly applied across all 20 countries.
    Sources said the template letter was sent to all the banks participating in the test, which is being co-ordinated by the Committee of European Banking Supervisors (CEBS).
    The results of the test will be published late on Friday (July 21).
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