Markets plunge after EBA stress tests

Monte Paschi Di Siena saw its share price drop by 9%

MILAN -- Stock markets across Europe are plunging further into the red with indexes of all major countries dropping over 1%, with the exception of London. Bringing the average down, once again, are the banks, with the Stoxx index showing the sector down 2.4 % after recent stress tests carried out by the European Banking Authority (EBA). Other sectors that are suffering include telecommunications and raw materials, both down 1.2%, as well as energy, down 1%, although oil is trading at over 40 dollars a barrel. 

 Among the hardest hit was Monte Paschi di Siena, which saw its share price drop 9% on Tuesday. The Tuscan bank was singled out as the only one that would lose all its capital under certain conditions in the EBA’s tests, and has since announced its plan to raise five billion euros in private capital in a fundraising effort headed by JP Morgan. 

 Despite the lack of confidence shown by markets in the stress tests, for Renzi these reveal that Italian banks are not at the heart of the European banking crisis, as was previously thought: “In the last 12 months, everyone has been saying that Italian banks were the problem, and we replied saying it wasn’t true. Finally, the stress tests have revealed the truth: we have the best bank in Europe, Intesa Sanpaolo, and four institutions out of five in a good situation. The only problem is Monte Paschi di Siena, for which we have been working on a market solution."

 The premier was confident that the bank would need no more recapitalisation, explaining that “for the first time, we have managed to eliminate the problem of non-performing loans. MPS has managed to get rid of them completely, thanks to Atlante’s funding.”

 Despite Renzi's reassurance, Italy's biggest bank UniCredit saw its share price drop 9.4% after it came out in the bottom five out of 51 in the stress tests.