Stress tests no guarantee of banks’ survival (Mar 2014)

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Source: CNA – Stress tests no guarantee of banks’ survival

Notable excerpts:

Just because a European bank passes the upcoming stress tests by European regulators does not mean it has the necessary mettle to continue to survive, the German banking federation said on Monday.

There will also be banks that pass the test, but still don’t have a future. The test result is no guarantee that banks can continue to survive successfully,” the head of the BdB federation, Juergen Fitschen, told the German news agency DPA in an interview.

I don’t believe that all the banks we see in Europe today will continue to survive in the long term,” said Fitschen, who is co-head of Germany’s biggest lender Deutsche Bank.

The banking sector will continue to consolidate, he predicted.

“The search for a successful business model remains a huge challenge given the low interest rates, and the new burdens of regulations and levies,” Fitschen said.

European banks are being subjected to so-called “stress” tests devised to see whether the financial sector could withstand a new crisis.

Part of the tests will be an asset quality review (AQR) to be carried out by the ECB from March.

The results of the stress tests will be published in October just before the ECB takes over its new role as European banking supervisor in November.

“The pressure on the sector is huge,” Fitschen said.

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