CLOSE

We permit the publication of our auditors’ report, provided the report is published in full only and is accompanied by the full financial statements to which our auditors’ report relates, and is only published on an access-controlled page on your website https://www.hermes-investment.com, to enable users to verify that an auditors’ report by independent accountants has been commissioned by the directors and issued. Such permission to publish is given by us without accepting or assuming any responsibility or liability to any third party users save where we have agreed terms with them in writing.

Our consent is given on condition that before any third party accesses our auditors’ report via the webpage they first document their agreement to the following terms of access to our report via a click-through webpage with an 'I accept' button. The terms to be included on your website are as follows:

I accept and agree for and on behalf of myself and the Trust I represent (each a "recipient") that:

  1. PricewaterhouseCoopers LLP (“PwC”) accepts no liability (including liability for negligence) to each recipient in relation to PwC’s report. The report is provided to each recipient for information purposes only. If a recipient relies on PwC’s report, it does so entirely at its own risk;
  2. No recipient will bring a claim against PwC which relates to the access to the report by a recipient;
  3. Neither PwC’s report, nor information obtained from it, may be made available to anyone else without PwC’s prior written consent, except where required by law or regulation; and
  4. PwC’s report was prepared with Hermes Property Unit Trust's interests in mind. It was not prepared with any recipient's interests in mind or for its use. PwC’s report is not a substitute for any enquiries that a recipient should make. The financial statements are as at 25 March 2016, and thus PwC’s auditors’ report is based on historical information. Any projection of such information or PwC’s opinion thereon to future periods is subject to the risk that changes may occur after the reports are issued and the description of controls may no longer accurately portray the system of internal control. For these reasons, such projection of information to future periods would be inappropriate.
  5. PwC will be entitled to the benefit of and to enforce these terms.
I accept
CLOSE

1. Select your country

  • United Kingdom
  • Austria
  • Australia
  • Belgium
  • Denmark
  • Finland
  • France
  • Germany
  • Iceland
  • Ireland
  • Italy
  • Luxembourg
  • Netherlands
  • Norway
  • Singapore
  • Spain
  • Sweden
  • Switzerland
  • USA
  • Other

2. Select your investor type

  • Financial Advisor
  • Discretionary Investment Manager
  • Wealth Manager
  • Family Office
  • Institutional Investor
  • Investment Consultant
  • Charity, Foundation & Endowment Investor
  • Retail Investor
  • Press
  • None of the above

3. Accept our terms and conditions

Proceed

The Hermes Investment Management website uses cookies to remember your preferences and help us improve the site.
By proceeding, you agree to cookies being placed on your computer.
Read our privacy and cookie policy.

The moment of truth is approaching

Home / Spectrum / The moment of truth is approaching

Filippo Alloatti, Senior Credit Analyst
29 July 2016
CreditFixed IncomeSpectrum

The much anticipated 2016 EBA Stress Test results will be unveiled tonight at 9pm BST. There is always a difficult balance to strike in this type of exercise as the test must be credible, and is therefore designed to result in a number of banks showing a capital deficit, and subsequently test some of the available solutions, i.e. capital actions must be ready in order to fill eventual gaps.

This year’s Stress Test is of limited scope and different in nature from the 2014 test which marked - as part of the comprehensive assessment (CA) - the beginning of the new banking supervision under the ECB. The Stress Test is not a pass/fail exercise (although many of those watching the banking sector cannot resist the temptation to view it as such). No hurdle rates or capital thresholds are defined for the purpose of this year’s exercise. The idea is rather to provide useful inputs into this year’s Supervisory Review and Evaluation Process (SREP), the annual conversation between the ECB and the 51 banks “stress-tested”. This conversation is finalised by November, when capital requirements for the banks are declared.

Yes, this year there is a focus on the asset quality of 51 banks, representing 70% of the total banking assets in the EU. However, in some recent communications between the Single Supervisory Mechanism (SSM) and Italy’s Monte dei Paschi di Siena, the SSM’s encouragement of the accelerated disposal of non-performing assets (NPA) by Monte has engendered confusion. It is important to remember that these new targets are the binding constraint for the most vulnerable Italian bank from the SSM, and not dependent on the results of the Stress Test per se.

There is already speculation of different banks considering steps such as selling financial assets and shares to raise capital. The more orderly the fashion in which this is carried out, the better. Looking back at the 2014 Stress Test, banks were given the customary 6 to 9 months window to raise capital. The existing rules offer some flexibility at the margins; a certain latitude to avoid potentially market-disrupting events such as a bail in. It is our understanding that the EU State Aid rules, with a focus on a level playing field, permits some degree of state support if done at market prices. It will be particularly interesting to see the stance taken by the European Commission, as Italy is far from the only country whose banks look vulnerable.

We will return to the 2016 Stress Test after the announcement and, what shall be more interesting, the “responses” from the banks. Stay tuned.

Share this post:
Filippo Alloatti Senior Credit Analyst Filippo joined Hermes in 2011 as a senior credit analyst on the Hermes Credit team and specialises in European and US financials. Prior to this he served in a similar capacity at Fortis Investments in the global credit and hybrids group and subsequently at BNP Paribas Asset Management in Paris. Other roles at Fortis included securitisation analyst and regulated utilities and property analyst. Filippo began his career in Germany at Sal Oppenheim & Cie and Berenberg Bank, where he was responsible for derivatives trading and M&A financing. Filippo holds a Bachelor’s degree in Economics & Business Administration from the Universita’ La Sapienza in Rome.
Read all articles by Filippo Alloatti

Find posts by author

  • Andrey Kuznetsov
  • Audra Stundziaite
  • Filippo Alloatti
  • Fraser Lundie
  • Jonathan Lee
  • Louise Dudley
  • Mark Sherlock, CFA
  • Mitch Reznick
  • Tatiana Bosteels

Find posts by category

  • Select category
  • credit
  • fixed income
  • spectrum