The tens of billions of euros euro zone banks set aside for loan losses in their latest annual accounts may have substantially reduced the chance of institutions failing ECB stress tests in the next few months.
A total of 71.5 billion euros ($99.3 billion) was set aside in 2013 by the 20 biggest listed banks involved in the exercise. Many analysts also boosted capital ratios by raising cash and hoarding profits.
If replicated across the 128 lenders subject to tests the European Central Bank aims to complete by October, it could mean no bank will fail or be forced to raise large amounts of new capital. Such limited consequences helped discredit previous tests by EU financial watchdog the European Banking Authority (EBA) - one reason the ECB is keen to show that its new exercise will truly be tough on the region's banks.
While some analysts have suggested that a failure by the ECB to force the closure of any euro zone bank after its own tests could again undermine the credibility of the exercise, many see it as more important that the ECB's scrutiny creates a stronger banking system - something the data suggest is happening.
"A lot of action has been taken," said to media Carla Antunes da Silva, head of European banks research at Credit Suisse. "I don't think you need to have a day of reckoning where a big bank needs to fail.
"A few years ago, if you had asked investors what they wanted to see from stress tests they would have said 'bodies' - but not anymore," she added.
A survey last month of 200 clients of her own bank had, she said, found very few seeing it as essential to the credibility of the ECB stress tests that a major bank should fail.
ECB President Mario Draghi himself has highlighted progress already made since they learned of his plans and said this month he was "pretty confident" that the testing regime would "find a stronger banking system than we had before announcing it".
The EBA, which will coordinate this year's stress tests with the ECB, said investors were interested not just in whether banks pass or fail but their sensitivity to stress and how supervisors deal with the results.
"The credibility of the EU-wide stress test rests on transparency; market participants will determine for themselves how supervisors and banks are dealing with remaining pockets of vulnerability."
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