Stimulating debateThe biggest-ever review of the single currency's major banks saw 24 of the 123 lenders assessed by the ECB fail its stress tests, which were designed to pit institutions against a hypothetical financial disaster.
Following the
stress tests, there have been calls for the ECB to start buying sovereign bonds to revive the region's flagging recovery, reports CNBC's Katrina Bishop.
25
The number of lenders that failed the ECB's stress tests
150
The number of branches Lloyds Bank is planning to close over the next three years
Although the ECB has already launched a host of stimulus measures to reverse growth-sapping disinflation, including cutting interest rates to record lows, many economists have warned that these measures are not enough, writes Bishop.
ECB Governing Council member Athanasios Orphanides told CNBC that the central bank "should have already started" buying sovereign bonds - or have introduced full-blown quantitative easing (QE). "Now that the stress tests are out of the way, it would be quite positive for the euro area if they announced that move as soon as possible," said Orphanides.
Unlike central banks in the UK, the US and elsewhere, the ECB has not launched a full-blown QE programme - mainly because there are no common eurozone bonds and the process of picking which country to buy is fraught with political dangers, explains Bishop.
CNBC story
In the balance
Britain's biggest banks all passed the ECB stress tests. But Marion Dakers of
The Telegraph warns that
the Bank of England's own stress tests in December will highlight more problems on the UK institutions' balance sheets, by peering more closely at mortgages and commercial real estate exposure.
Analysts at Deutsche Bank claimed these tests "can be used to exert sustained (possibly increasing) pressure on banks to retain capital", even if the exact results are debatable, said Dakers.
"The Bank's test," she added, "will imagine that the UK's stubbornly weak productivity in recent years triggers a slump in growth, which in turn sends sterling tumbling against other currencies, inflation goes rocketing and, to top it all, the Bank then delivers a surprise hike in interest rates."
The Telegraph article
Closing time?
The British institution that came closest to failing the ECB's stress tests was Lloyds Banking Group. Lloyds also hit the headlines after announcing plans to cut 9,000 jobs and close 150 branches over the next three years as it moves towards a more digital offering.
Matthew Beesley, Head of Global Equities at Henderson Global Investors, sees many more branch closures across UK retail banking on the horizon.
"It might be an uncomfortable truth for many to hear, but the UK is dramatically over-banked for the digital age," Beesley wrote at CityAM.com.
"Deutsche Bank and the consultancy CACI recently concluded that one could build nationwide coverage with just 800 branches. Lloyds currently has over 2,200 physical outlets, Barclays 1,500, against Nationwide's 800 - and there is a clue in the name there. If the UK's largest mutual is what its name suggests it aims to be, 800 branches are indeed sufficient for country-wide coverage."
According to Beesley, a further 4,000 branches might need to close nationwide, although he added that "the bank branch is not completely going away".
CityAm.com opinion piece
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