LONDON (AP) – The recent stress tests into Europe’s biggest banks were meant to reassure that, on the whole, they are strong enough to withstand another crisis. A slump in share prices across the sector since last Friday’s publication of the tests results suggests many investors are not convinced.
On Tuesday, bank stocks across Europe – even those that were effectively given a clean bill of health by the European Banking Authority’s tests – were down sharply for the second day running and weighing heavily on the wider market indexes.
The falls aren’t just confined to Italy, where concerns over the health of the banking sector have been the most acute. Britain’s Barclays PLC was down 3.2 percent while Credit Suisse slid 6.2 percent and Italy’s UniCredit fell another 4.2 percent. As a result, the main indexes in Europe were sharply lower – the Stoxx 600 index of leading European shares was down 1.3 percent.
It’s difficult to pin down a single reason why European banking stocks have taken such a battering this week. After all, Friday’s stress tests into Europe’s 51 biggest banks showed that only Italian bank Monte dei Paschi di Siena, or MPS, was severely underfunded.
Michael Hewson, chief market analyst at CMC Markets in London, says the tests’ findings failed to address many of the concerns investors have about the state of Europe’s banks, including the rising costs they face for parking their cash at the European Central Bank.