Guardian UK
Hypo Real Estate was one of seven European banks to fail a health check on the day that seven US institutions were taken into federal receivership. Photograph: Diether Endlicher/AP
More than 100 banks in the US have now collapsed so far this year after another seven were taken over by regulators late on Friday – the same day that seven European banks failed a financial health check.
With rising bad debts tied to commercial and residential mortgages, the number of US bank failures this year is expected to exceed last year's figure of 140. The largest of the seven US banks just seized by the Federal Deposit Insurance Corporation – which acts as a receiver and protects depositors – was Crescent Bank and Trust Company in Georgia, with more than $1bn in assets. In all, the seven failed banks had total assets of $2bn.
In Europe, investors will have a first real chance tomorrow to react to the results of banking stress tests designed to ease concerns about institutions' financial strength and exposure to debt-laden countries such as Greece.
Regulators assessed how banks would stand up to a double dip recession and a sovereign debt crisis. But several analysts questioned whether the tests were tough enough, since, for example, banks were only required to simulate losses on sovereign debt held for trading purposes and not on bonds they might hold to maturity.
Five of the seven institutions that failed the tests were Spanish cajas, or regional savings banks, with Greece's ATE and Germany's Hypo Real Estate being the other two.
Christophe Nijdam at research firm AlphaValue said the failure rate was just 8% compared with 53% for tests conducted in America last year, when 10 of 19 banks tested needed to raise about $75bn (£48bn) in new capital.
Research firm CreditSights said it expected a benign market reaction to the European tests, given the amount of information divulged by individual banks: "Controversy remains over the treatment of sovereign risks, but private sector loan losses look to have been adequately factored in. [There was] better disclosure than we had expected, which allows observers to make further adjustments to the scenarios if they want to."
Britain's four biggest banks, Barclays, HSBC and the bailed-out Royal Bank of Scotland and Lloyds Banking Group, comfortably passed the tests.
With rising bad debts tied to commercial and residential mortgages, the number of US bank failures this year is expected to exceed last year's figure of 140. The largest of the seven US banks just seized by the Federal Deposit Insurance Corporation – which acts as a receiver and protects depositors – was Crescent Bank and Trust Company in Georgia, with more than $1bn in assets. In all, the seven failed banks had total assets of $2bn.
In Europe, investors will have a first real chance tomorrow to react to the results of banking stress tests designed to ease concerns about institutions' financial strength and exposure to debt-laden countries such as Greece.
Regulators assessed how banks would stand up to a double dip recession and a sovereign debt crisis. But several analysts questioned whether the tests were tough enough, since, for example, banks were only required to simulate losses on sovereign debt held for trading purposes and not on bonds they might hold to maturity.
Five of the seven institutions that failed the tests were Spanish cajas, or regional savings banks, with Greece's ATE and Germany's Hypo Real Estate being the other two.
Christophe Nijdam at research firm AlphaValue said the failure rate was just 8% compared with 53% for tests conducted in America last year, when 10 of 19 banks tested needed to raise about $75bn (£48bn) in new capital.
Research firm CreditSights said it expected a benign market reaction to the European tests, given the amount of information divulged by individual banks: "Controversy remains over the treatment of sovereign risks, but private sector loan losses look to have been adequately factored in. [There was] better disclosure than we had expected, which allows observers to make further adjustments to the scenarios if they want to."
Britain's four biggest banks, Barclays, HSBC and the bailed-out Royal Bank of Scotland and Lloyds Banking Group, comfortably passed the tests.
