Of the 90 European banks that underwent stress tests last Friday, only eight failed to reach the minimum Capital Tier 1 Ratio of 5%, and five of those were Spanish institutions. Together, those eight institutions show a capital shortage of 2.5 billion euros, according to the stress test results announced by the European Banking Authority.

The Spanish banks that flunked the tests were CatalunyaCaixa, Banco Pastor, Unnim, Caja3 and CAM, along with two Greek banks are one Austrian. Of the five major categories that are evaluated in the tests, the European regulator takes each bank’s highest quality capital as the main indicator, because it’s the one asset that can best enable it to face potential future losses or writedowns. EBA said 16 other banks showed between 5% and 6% of Tier 1 capital, barely reaching a passing grade.

While the results are positive in general, there was widespread skepticism among analysts that they will help overcome the confidence crisis. The consensus is that each bank must now be analized in greater detail. For example, of the 14 German banks evaluated, Deutsche Bank showed a CT1R of only 6.5%, reflecting a dangerous exposure to Greek debt. Some analysts say it’s unclear if the stress tests included toxic assets. The two major Spanish banks operating in Mexico, BBVA and Santander, came out with flying colors.

Family Income Drops

Between 2008 and 2010, the average quarterly income of Mexican families dropped by 12.3%, while spending decreased 3.8%, according to a biannual study released by the National Statistics Institute, INEGI. During the same comparative period, general income decreased from 39,823 to 34,936 pesos. Outlays fell from 31,809 to 30,596 pesos.

According to INEGI’s National Home Income and Expenditure Survey, the monetary portion of total income fell more than the non-monetary component, decreasing 13.6% and 6.8%, respectively. Within monetary revenues, the biggest drops came in independent work with 38.9%, and property rentals with 34.8%. In non-monetary current income, fringe remunerations fell 43.6%, while auto-consumption dropped 21.4%.
INEGI, which provides very little information on methodology, says that of the 10 segments in which the population’s income levels are divided, says the 10th segment, corresponding to the highest incomes, was the one that suffered the greatest setback with 17.8%, while the first segment, representing the poorest families, experienced an income drop of 7.6% during the period covered by the survey.

Also, check out the following opinion columns:

“Rich and Powerful”, by Marco A. Mares

There are five groups of investors interested in acquiring the pension fund ING Afore. Unofficially, the fund¿s market value is US$2 billion. It is ranked third in the Mexican market, with assets of over 200 billion pesos. Outright divestiture is one of the options being analyzed. The ING data room is now open to interested parties. Among the playes are Banorte along with a Chilean partner, as well as Profuturo, which would vie along with another Chilean partner. The sale has its origins on the international financial crisis, after which the Dutch group decided to divest non-banking assets, to comply with a Dutch government bailout of 10 billion euros. In Mexico, the pension fund market shows a clear tendency towards consolidation, because margins have been squeezed to the limit.

“The Great Depression”, by Enrique Campos

We’re kicking off another week that promises to be economically intense and even decisive. These are days when the confidence factor is seriously undermined. Politicians are seen with growing mistrust due to their inability to agree on anything, just when they should set aside their particular interests. Regulators are viewed with skepticism because their reality is different from ours. This morning, all eyes are on European markets, where Spain got the worst stress test results. There is a lack of credibility on the prognosis. We’re witnessing a heart attack and we’re told that it’s only a minor cold. Politicians are unifying world public opinion, but against them! In Mexico we know a thing or two about incompetent politicians, but the finest example today is taking place in the U.S., where disappointment with politicians grows by leaps and bounds.

“Strongbox”, by Luis Miguel González

The debt ceiling talks in Washington are yet another tale of terror. The U.S. faces an economic relapse while the political class shows it’s disconnected from reality. There’s a 50% chance of a downgrade in the next 90 days, according to S&P. We were already spooked, and Grandpa decided to tell us another horror story. In other times, the S&P warning might have been taken philosophically, but today’s situation is far too touchy. Across the Atlantic, there is abundance of horror movies. The euro zone has arthritis, and Germany insists on dictating austerity lessons. In Washington, Republicans are immersed in a tug of war with Obama, more than anything else, to expose him as an incompetent president. Obama has lost his powers of persuasion, and he appears to lack power. A default scenario is unthinkable, but there’s always a first time for everything.

rmena@eleconomista.com.mx