Europe/bank stress tests
François Baroin, Minister for the Economy, Finance and Industry, notes the results of the European bank stress tests for 2011. He hails the increased transparency of the exercise, both in terms of the results and the sovereign exposure of the banking groups taking part.
The exercise is a key part of efforts to respond to investors’ current perception of persistent weaknesses in the European banking sector. It is an important aspect of the global response to the crisis endorsed by the European Council. In this context, the goal of the tests – which cover the period 2011-2012 and relate to 91 banks – is to assess the resilience of the European Union’s banking sector.
It should be emphasized that the tests – which must be seen as one tool among others in the supervisors’ toolbox – are not a forecast but a way of judging the participating banks’ vulnerability in the event of tensions over their solvency in a plausible but unlikely stress scenario. In this sense, the test results give an indication on which to assess whether the banks are sufficiently capitalized to cope with a deterioration in economic and financial conditions that goes well beyond the most likely scenario.
In France, four banks – BNP Paribas, Groupe BPCE, Groupe Crédit Agricole and Société Générale, which represent more than 80% of all the assets in the sector – took part in the stress tests.
François Baroin welcomes the fact that the test results show all these banks are adequately capitalized and maintain – even in a stress scenario – the highest quality of equity capital levels (i.e. Tier 1 capital ratios significantly above 5%).
These results demonstrate the solidity of the French banking system./.