European banks are still heavily undercapitalized
One of today’s lead stories at Bloomberg News is a comprehensive critique of the recently published stress test of European banks, published by the European Central Bank (ECB) and the European Banking Authority (EBA).* The article cites a number of sources, but emphasizes particularly an ongoing study at the Danish Institute of International Studies (DIIS).
While the full study is not yet published, senior researcher Jakob Vestergaard has published three short essays on GEG Watch laying out the main, preliminary findings.
The study draws upon and elaborates on a study published in 2013, Behind smoke and mirros: On the alleged recapitalization of Europe’s banks. This first DIIS report on the topic also received considerable international attention, including a strong recommendation in New York Times, by Simon Johnson (former chief economist of the IMF).
The three short essays (in English) can be found here:
- Stress tests now as tough in the US as in Europe? Not exactly (29/11)
- Unpacking Europe’s banking stress tests: German and French banks at the brink of insolvency (20/11)
- European banking misery: pretending does not favours to lending (4/11)
* Technically, two separate reports were published: ECB’s Comprehensive Assessment and a stress report report published by the European Banking Authority (with large thematic overlaps). ECB’s report focuses on banks in the Eurozone, whereas EBA’s report covers large banks in all EU-countries, including the largest Danish banks.