Stricken Italian lender Banca Monte dei Paschi di Siena looked set to win an 11th hour reprieve Friday night when it announced it had secured underwriters to back a turnaround – just at the point when Europe’s banking authority placed it on the danger list of the region’s financial industry.
Stress tests by the European Banking Authority found that BMPS, the world’s oldest bank, would have the greatest difficulty out of 51 of Europe’s top banks covering its toxic loans between now and 2018 in adverse economic conditions.
The EBA unveiled that the Italian lender’s fully-loaded common equity tier 1 capital (CET1) ratio – a key measure of a bank’s ability to withstand shocks – would fall into negative territory, -2.23 percent, if faced with an adverse economic scenario in 2018; a swing of 14.23 percent from what is expected to be the baseline scenario.
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