06/11/2015 10:16
Domestic bankers are relieved from the limit of €30 bn set by the European Banking Authority (EBA) for participation in the stress tests of 2016 as this leaves out Cypriot banks.
As announced yesterday by the EBA, a total of 53 banks of EU Member States will be included in the process of stress tests compared to 123 banks that participated in the exercise of 2014.
In 2014 the Bank of Cyprus, the Hellenic Bank and the Central Cooperative Bank participated in the exercise.
"Cypriot banks have not been included in the pan-European stress test exercise because they do not exceed the limit of € 30 bn of assets", press representative of EBA Ian Palombi told StockWatch.
EBA’s announcement caused relief to officers of Cypriot banks as it gives them time to manage the already large problems that have accumulated in the system causing great concern.
If they participated in the exercise, Cypriot banks would have to pass stress tests of worst-case scenarios which would include big discounts on the value of problematic loans (€ 27 bn. in the whole system) that have accumulated on their balance sheets.
The biggest Cypriot banks are already in the process of capital review based on less extreme scenarios, the results of which will be announced in early December.
The single supervisory mechanism of the ECB, which has conducted the reviews is in discussion with the CB regarding the results.
"Cypriot banks have become fatigued from constant stress tests of recent years " was the comment of a banker after yesterday's announcement of the EBA.
The stress test will begin in late February 2016 across the EU, with the publication of the final methodology and scenarios.
The results of the exercise, including the results of individual banks, are expected to be published towards the end of 2016.
Bankers will await the results of the stress tests of 2016 with increased interest because, as indicated, should any weaknesses be identified in major banks, they will define the supervisory handling of smaller organizations too.
The non-inclusion of Cypriot banks will give them the opportunity to focus on the major problems facing their balance sheets because of red loans.
Despite the breathing space that the exception from stress tests gives them, banks are concerned about the impending end of the program, as no immediate solutions to their balance sheets’ problems are currently evident.
Based on the latest available data, banks have made provisions for only about 33% of red loans on their balance sheets, compared to 50% which is the standard in Europe. The difference translates into approximately €5 bn.
As announced yesterday by the EBA, a total of 53 banks of EU Member States will be included in the process of stress tests compared to 123 banks that participated in the exercise of 2014.
In 2014 the Bank of Cyprus, the Hellenic Bank and the Central Cooperative Bank participated in the exercise.
"Cypriot banks have not been included in the pan-European stress test exercise because they do not exceed the limit of € 30 bn of assets", press representative of EBA Ian Palombi told StockWatch.
EBA’s announcement caused relief to officers of Cypriot banks as it gives them time to manage the already large problems that have accumulated in the system causing great concern.
If they participated in the exercise, Cypriot banks would have to pass stress tests of worst-case scenarios which would include big discounts on the value of problematic loans (€ 27 bn. in the whole system) that have accumulated on their balance sheets.
The biggest Cypriot banks are already in the process of capital review based on less extreme scenarios, the results of which will be announced in early December.
The single supervisory mechanism of the ECB, which has conducted the reviews is in discussion with the CB regarding the results.
"Cypriot banks have become fatigued from constant stress tests of recent years " was the comment of a banker after yesterday's announcement of the EBA.
The stress test will begin in late February 2016 across the EU, with the publication of the final methodology and scenarios.
The results of the exercise, including the results of individual banks, are expected to be published towards the end of 2016.
Bankers will await the results of the stress tests of 2016 with increased interest because, as indicated, should any weaknesses be identified in major banks, they will define the supervisory handling of smaller organizations too.
The non-inclusion of Cypriot banks will give them the opportunity to focus on the major problems facing their balance sheets because of red loans.
Despite the breathing space that the exception from stress tests gives them, banks are concerned about the impending end of the program, as no immediate solutions to their balance sheets’ problems are currently evident.
Based on the latest available data, banks have made provisions for only about 33% of red loans on their balance sheets, compared to 50% which is the standard in Europe. The difference translates into approximately €5 bn.
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