EU Stress Test Shows How Capital Rules Give Room to Hide
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The European Union’s toughest-ever stress test was meant to leave banks with nowhere to hide. The results show how the bloc’s capital rules got in the way.
A total of 24 lenders failed the European Banking Authority’s stress test with a capital shortfall of 24.6 billion euros ($31.2 billion). The EBA used EU rules as applicable over the three-year horizon of the test. These give national supervisors scope to allow banks to count instruments whose eligibility as core capital will be gradually eliminated over the next four years.