It may seem like a lifetime away, but it is only in July that the European Banking Authority published the result of “stress tests” on 90 banks across 21 countries in the EU, covering around 65% of the banking industry.
Eight failed. Sixteen were border line with core tier one capital ratios – a key measure of financial strength – of between 5% and 6%.
So presumably, Dexia, the Franco-Belgian bank on which markets are currently fixated, was in one of the danger-zone categories?
Well no. Its statement issued on the day proclaimed “no need for Dexia to raise additional capital”.
…….The tests have proved to be meaningless even quicker than they were in 2010 when Ireland’s banks were given a clean bill of health, only to be bailed out four months later. In July, 2011 the EBA had been reckoning that the capital shortfall of the banks that failed was just €2.5bn. Now the markets reckon that the hole is more like €300bn.
via How did Europe’s bank stress tests give Dexia a clean bill of health? | Business | guardian.co.uk.