The average price/book ratio for large and complex banking groups in the euro area is currently just over 0.5. This reflects the opinion of investors that banks overestimate the value of their assets, will not deliver the expected rate of return or will require fresh capital. Moreover, confidence in the banking sector is much lower in some euro area countries than in others.
That also causes fragmentation in the single market, as reflected in the difficulties some banks face in obtaining market funding. The results of our “inventory” are then incorporated in a stress test, which the European Banking Authority (EBA) will perform in close cooperation with us. Our staff members are now elaborating the methodical details of the comprehensive assessment.