FRANKFURT (MNI) – A stress tests study assessing western European
Financial institutions revealed that approximately 25% of financial
institutions may need new capital, rating agency Standard & Poor’s said.
The study named “Stressing The System: The Outcomes For Western
Europe Of A Hypothetical Interest Rate Shock” tests the impact of a
sharp increase in bond yields and a severe economic downturn, S&P said.
The precise assumptions of the study were not freely available.
“Our stress scenario would prompt the recapitalization of around
one-quarter of EU financial institutions, especially in Greece, Ireland,
Italy, Portugal, and Spain,” the report said.
“Overall, our scenario analysis findings indicate that total bank
recapitalization costs could range between E200 billion and E250 billion
billion, representing about 2% of the aggregate GDP of these banks’
jurisdictions,” it added.
S&P said that the hypothetical stress test is more extreme than the
agency’s base-case forecasts, and that it currently does not “envisage
a system shock on this scale.”
[TOPICS: MR$$$$,M$X$$$,MFX$$$,MGX$$$]
