LONDON (Reuters) -All of Monte dei Paschi's capital was wiped out in a European Union stress test of banks on Friday as the Italian lender headed for government-sponsored merger talks with domestic peer UniCredit, whose own score fell short of the sector's aggregate performance.
The exercise by the European Banking Authority showed that EU banks took a 265 billion euro ($314.7 billion) hit in a test of their resilience to economic shocks, which still left them with two-thirds of their buffers intact
The EBA tested the resilience of 50 top lenders to economic shocks, though there is no formal pass or fail mark. The banks account for 70% of EU banking assets
Under the harshest scenario spanning three years to 2023, which baked in a prolonged fallout from COVID, the aggregate core ratio of capital to risk-weighted assets fell by nearly 500 basis points, pushing the ratio down to 10.2% from 15%.
Monte dei Paschi, however, ended the test with a core capital ratio of minus 0.1% under the adverse scenario. UniCredit came in at 9.
Monte dei Paschi fared worst in the EU's stress test five years ago, in a sign of how deep-rooted problems at the world's oldest bank have yet to be sorted out.
None of the Italian banks tested, the others were Mediobanca, Banco BPM and Intesa Sanpaolo, reached the 10% sector aggregate though several were very close.
Buon giorno
