European Banks Would Have Passed Fed’s Stress Test

LONDON — After years of turmoil in the financial markets, regulators in both the United States and Europe have put banks through the wringer to see if they would be able to weather future shocks.

Last week, the Federal Reserve published its latest stress test of the country’s financial institutions. Fifteen of the 19 banks included in the test, including Goldman Sachs and JPMorgan Chase, met the Fed’s criteria.

That follows similar efforts by European regulators, who have conducted their own checks on the Continent’s banks. In the latest stress test, published last December, firms were told to raise an additional 114.7 billion euros ($152.7 billion) to shore up their capital reserves.

Authorities on both sides of the Atlantic have used different methods for their stress tests. But how would banks compare on an apples-to-apples basis? Analysts at Barclays ran the numbers to figure out whether European banks would have passed the Fed’s most recent test.

Here’s what they had to say:

“We believe the 14 large European banks we cover have enough capital in aggregate to pass a representative version of the U.S. stress test.

“For European banks, our conclusion that the 14 large European banks we cover have enough capital in aggregate to pass a representative version of the U.S. stress test illustrates the improvement in capital achieved by the sector and the conservatism of current capital redistribution plans.”

The banks that the Barclays analysts cover include HSBC, Banco Santander and Deutsche Bank.

Barclays said that it was unlikely that European banks would have fallen below the Fed’s 5 percent benchmark for Tier 1 common ratios. Indeed, the analysts said for that to happen, the combined losses for all the banks would have to exceed 600 million euros. That remained unlikely, they added, despite continuing concerns about the health of the European economy.