Is the European banking system more robust? An evaluation through the lens of the ECB's Comprehensive Assessment

Guillaume Arnould and Salim Dehmej ()
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Salim Dehmej: Centre d'Economie de la Sorbonne - Labex Régulation Financière (Réfi), https://centredeconomiesorbonne.univ-paris1.fr

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

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: financial stability; stress tests; banking; financial regulation; Basel III (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2015-07
New Economics Papers: this item is included in nep-ban, nep-cba, nep-cfn, nep-eec, nep-mon and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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ftp://mse.univ-paris1.fr/pub/mse/CES2015/15061.pdf (application/pdf)

Related works:
Working Paper: Is the European banking system more robust? An evaluation through the lens of the ECB's Comprehensive Assessment (2015)
Working Paper: Is the European banking system more robust? An evaluation through the lens of the ECB's Comprehensive Assessment (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:mse:cesdoc:15061

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