EU banks have credit losses of $580 billion

As many as 22 large banks in Europe may have accumulated credit losses of close to ¤400 billion (over $580 billion) for this year and the next year, according to draft conclusions of ‘stress tests’ conducted by European regulators, a media report has said.

Citing officials who have seen a draft of conclusions of ‘stress tests’ conducted by European regulators, the International Herald Tribune said, “Twenty-two large banks in Europe may have accumulated credit losses of close to ¤400 billion for this year and next.”

The bank tests in Europe were conducted by the Committee of European Banking Supervisors or CEBS.

At a meeting next Thursday and Friday in Sweden, European Union finance ministers are planning to publish at least one headline figure on banking health, based on the results of the tests, the officials, who were not authorised to speak publicly told the International Herald Tribune.

The EU finance ministers are also planning to initiate a stress test for European insurance companies soon, and the results to be assessed in the spring, the report said.

According to EU officials, the stress tests for European insurers would be conducted by the Frankfurt-based committee of European insurance and occupational pensions supervisors.

Unlike a similar exercise carried out in the United States this year, the release of the European results will not include assessments of further action required by individual banks to bolster their balance sheets.

The committee, in May this year, confirmed that the stress test would not identify individual banks that might need recapitalisation, and it was the responsibility of national governments to name such banks.

The International Monetary Fund will publish its own forecast of bank health on Wednesday as part of its Financial Stability Review. The fund estimated in April that European banks still required $375 billion in capital to cover losses, compared with $275 billion for US lenders.