Is the European banking system more robust An evaluation through the lens of the ECBs Comprehensive AssessmentReport as inadecuate




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* Corresponding author 1 CES - Centre d-économie de la Sorbonne 2 LABEX Refi

Abstract : The results of the Comprehensive Assessment CA conducted by the ECB seem to attest the soundness of the European banking system since only 8 of 130 assessed banks still need to raise €6 billion. However it would be a mistake to conclude that non failing banks are completely healthy. Using data provided by the ECB and the ECB and the EBA after the CA, we assess the capital shortfalls for each banks by considering the transitional arrangements, an implementation of Basel III sovereign debt requirements and an enhancement of the leverage ratio. In addition we show, that if the CA has been a very complex exercise, it is not the best lens through which the soundness of the eurozone banking system should be evaluated. The assumptions used for the Asset Quality Review AQR and the stress-tests lead to week scenarios and requirements that undermine the reliability of the results. Finally we show that the low profitability, the massive dividend distribution and the incurred fines, give rise to concern on the ability of eurozone banks to meet the incoming capital requirements.

Keywords : Basel III Financial stability stress tests banking financial regulation





Author: Guillaume Arnould - Salim Dehmej -

Source: https://hal.archives-ouvertes.fr/



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