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Spanish banks' stress tests questioned
22 June 2010 @ 20:02

Spain's two leading banks – BBVA and Santander – need to raise £9bn of new capital – a leading City analysts has claimed.

The warning comes just days after the governor of the Bank of Spain declared the pair "the strongest in Europe".

BBVA and Santander were last week subjected to a stress test by the Bank of Spain that led it to declare them the two best capitalised institutions in Europe, but its findings have been challenged by Joseph Dickerson of Execution Noble.
 
Mr Dickerson, who conducted what he described as a balance sheet stress test of "severe outcomes within the scope of possibility", said the markets continued to have doubts about Spanish banks despite the comments from the Bank of Spain.

"The central bank claims that it seeks to ensure that banks have adequate capital "not only for what would currently seem to be the most reasonable scenarios, but also for complex growth scenarios in the near future," he said.

"Most reasonable begs the question as to whether the banking system is being stressed for truly adverse scenarios – necessary given ongoing rising unemployment, deflationary forces, the well-known effects of a domestic property bust, tight interbank conditions, and an international buyers' strike on Iberian bank paper."

Mr Dickerson says the banks might need as much £9bn each based on his stress test, which assumes conditions such as 10pc write off in the value of their holdings of Spanish government debt.

A spokesman for Santander declined to comment on the report, pointed out the bank had conducted its own rigorous stress tests.

Source: The Telegraph



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