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Stress test misery for Monte dei Paschi

Monday, October 27, 2014 - 01:57

Italy's Monte dei Paschi slumps after having the biggest capital hole to fill in a health check of European banks that was generally seen as good news for the sector. Hayley Platt looks at how the markets have reacted to the tests.

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The bank stress tests beat market expectations but there were big losers. Shares in Italy's Monte dei Paschi fell more than 20 percent after the tests revealed it had the biggest capital hole to fill. BGC's Mike Ingram SOUNDBITE: Mike Ingram, Strategist, BGC, saying (English): "It's fairly clear from the numbers that it needs some deep restructuring but I think one of the questions which is probably going to come out from this exercise in Italy is what are regulators doing and I'm sure that's a question that Mario Draghi as a former governor of the Bank of Italy is going to be asked in future days." Fewer than one in five of the euro zone's lenders failed the test at the end of last year and many have since repaired their finances. The euro zone's banking index initially rose. Low-rated government bond yields dropped and the euro edged a little higher. Robert Halver from Germany's Baader Bank says the test had comforted investors. (SOUNDBITE) (German) HEAD OF CAPITAL MARKET ANALYSIS AT BAADER BANK, ROBERT HALVER, SAYING: "There is no new banking crisis because the 10 billion still missing for the 13 banks which failed the ECB stress test will very easily be found in a world of low interest rates and a flood of liquidity. So there is no new banking crisis and no new shake up of the euro zone." French banks were largely given a clean bill of health with shares initially rising 2-3%. Francois Chaulet is from Montsegur Finance. (SOUNDBITE) (French) MONTSEGUR FINANCE ASSET MANAGER FRANCOIS CHAULET SAYING: "That's really about reassurance and is part of a pattern of confidence with the support of the European Central Bank which shows that the sector is truly under control and under permanent review." Not all analysts and investors are convinced the test was tough enough Some worry the capital shortfall identified was not realistic But it has shone a light on the trouble spots. And provides the clearest picture yet of the health of the euro zone's banks more than seven years after the financial crisis erupted.

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Stress test misery for Monte dei Paschi

Monday, October 27, 2014 - 01:57