Are Europe's banks now crisis-proof?

The latest stress test carried out by the European Banking Authority has revealed that Europe's major banks are more stable than they were two years ago. Substantial recapitalisation has made them more resilient, the authority stated. But some commentators are still concerned about banks in Spain and Italy.

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Savon Sanomat (FI) /

Banks in a better state today

Savon Sanomat is relieved to see that the great majority of European banks have passed the stress test:

“The last and somewhat more comprehensive bank stress-test was carried out in 2014. The results of this latest test show that the banks have built up their core capital within two years and consolidated their balance sheets. … Most eyes were on the Italian bank Monte dei Paschi di Siena, which is known to have been struggling for some time. The stress test confirmed this, but shortly before the results were published the bank presented its own bailout plan. It wants to attract five billion euros in private investment and sell off bad loans worth nine billion euros. We can only hope that the bank is successful with this plan, because ultimately this is about preserving the credibility of the Italian banking sector as a whole.”

The Independent (GB) /

Problems far from solved

The financial sector is not yet over the hump, primarily due to Spain and Italy, warns The Independent:

“The latest official 'stress tests' of the financial robustness of leading banks across the EU are a timely reminder that the European financial system is far from fixed. ... The long-held fear among Europe's elite is that either Spain or Italy would end up in the same dire state as Greece, and require emergency aid from Germany to keep going. The problem with Spain and Italy is that they are so much larger than Greece it would be difficult even for Chancellor Merkel to find the funds to avoid a massive default and banking collapse in either, and certainly not simultaneously in both.”

De Volkskrant (NL) /

Europe should go easy on Italy

Europe must handle the struggling Italian banks very carefully, De Volkskrant warns:

“The hard line proposed by the politicians of northern Europe is understandable. It is not just that reaching the agreements on the [ESM] stability fund was so much work but also that the voters could lose their already wavering faith in Europe entirely if the rules are bent every time banks get into trouble. Yet in the case of Italy, whose economy is so important, this cautious approach is justified. The consequences of a 'bail in' would almost certainly be the end of the Renzi government. … If the Movimento Cinque Stelle won the election there would be a risk of Italy leaving the Eurozone. So Europe must perform a clever balancing act. … It must not be too strict with Italy, but nor can it be too lenient because voters in northern Europe wouldn't stand for it.”