2009-10-02 08:22:38 Xinhua Web
Editor: Cao Jie
Twenty-two major banks in the European Union (EU) may register credit loss
of 400 billion euros (581.6 billion U.S. dollars) in 2009 and 2010 under a worst- case scenario, results of a EU-wide
stress test showed on Thursday.
If economic conditions become more adverse than currently expected, "the
potential credit and trading losses over the years 2009-2010 could amount to almost 400 billion euros," EU finance ministers
said in a statement after receiving the results of the stress test.
The test, carried out by the Committee of European Banking Supervisors (CEBS),
were presented to the ministers when they are holding an informal meeting in the Swedish port city of Gothenburg.
Swedish Finance Minister Anders Borg, whose country holds the EU rotating
presidency, told reporters that the stress test showed that European banks are "adequately capitalized",
even in the worst-case scenario.
"The financial position and expected results of banks are
sufficient to maintain an adequate level of capital also under such negative circumstances," EU finance ministers
said in the statement.
"Under the conditions applied in the exercise large EU banks appear sufficiently
capitalized to head off a severe macroeconomic deterioration," they added.
The ministers said the resilience of the European banking system
reflects the recent increase in earnings forecasts and, to a large extent, the important support currently provided by the
public sector to the banking institutions, notably through capital injections and asset guarantees, which has augmented their
capital buffers.
The worst-case scenario assumed that the EU economy would shrink by 5.2
percent in 2009 and by 2.7 percent in 2010.
The European Commission had forecast that the EU economy would drop by 4
per cent this year, ahead of a possible recovery in 2010.
If under the baseline scenario, reflecting current macroeconomic projections,
the 22 major European cross-border banking groups' capital ratios would be well above a minimum level set by global banking
rules.
But EU finance ministers warned that banks should continue strengthening
their financial position, while ensuring a continued availability of credit to economy.
The 22 banking groups represent approximately 60 percent of the total assets
of the EU banking sector.
