In their simplest form the stress tests do what they say on the tin, they are tests upon each banks resilience to survive increasingly severe market downturn test case scenarios...the less well they do under stressed scenarios the more risk the markets will then perceive that institution to have, which in turn will affect each entities percieved valuation and ultimately the share price...hence the importance of getting a good grade in these stress tests
http://www.marketwatch.com/story/eu-bank-stress-tests-could-end-up-cheering-markets-2014-10-24 Investment bankers, meanwhile, are hoping that the conclusion of the tests will unleash a round of consolidation among European banks, especially in Italy’s fragmented market, which analysts think will be home to multiple stress-test failures. Investment bankers say that some large lenders have been considering acquisition opportunities for more than a year, but have delayed pulling the trigger until after the tests.
http://m.rte.ie/news/business/2014/1024/654566-permanent-tsb/ Analyst Ciaran Callaghan at Merrion Capital said that he thinks that Permanent TSB's failure in the theoretical stress test may actually be a positive development for the bank, helping to accelerate its capital restructuring and return to private ownership.
"The ability to attract private investment and emerge from complete government ownership should be credit positive for the bank, enhancing its future funding prospects and improving medium-term viability," he added.
A lot will actually depend on the report the ecb release on boi. If it's as comprehensive as promised then it should reveal whats going on under the hood. Passing the tests is one thing but finding out the exact grade will be interesting.
http://www.permanenttsbgroup.ie/investor-relations/media-centre/press-releases/2014/18-09-2014.aspx these mortgage arrears data above is not the true picture arrears cases 90 days+ have fallen by over 10000 from peak,and apparently there were different rules applied to ptsb in the stress tests than other irish banks.the last stress tests they did was extreme and these adverse senarios never played out so how is it possible to fail these stress tests.if you look at the btl arrears cases above there is 3300 cases with a stock provision on it of 1.3bn yet boi have got 8000+ cases and have got a provision of 1bn how can that be? these people will do anything to justify there criminal actions illegal tackeover of ilp in 2011.the 10000 arrears cases that have come back to performing have got a provision pinned to each one of these if they was to be written back up today that would be a writeup of 1bn I really don't know how these people get away with these fairytales.
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