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By Bloomberg

Europe’s latest bank stress test was flawed, and dozens of the region’s lenders aren’t sufficiently capitalized to improve the economy’s anemic growth or withstand a repeat of the 2008 financial crisis.

Those are the conclusions of analysts at the Danish Institute for International Studies and data from Keefe, Bruyette & Woods Inc. showing what would have happened if the European Central Bank had applied a leverage minimum that will be introduced next year.

A study by the Brussels-based Centre for European Policy Studies showed Deutsche Bank AG and BNP Paribas SA above the cutoff, while 28 other banks that passed the stress test would fail under the new rules.

The new standard requires banks around the world to have capital equal to 3 percent of total assets, complementing a system that weights them for risk. If the ECB had used that yardstick and demanded the highest-quality capital, 12 big European banks that passed the stress test would need to raise an additional 66 billion euros ($82 billion), according to Jakob Vestergaard, a senior researcher at the Danish institute.

The ECB didn’t subject bank leverage ratios to the stress test’s adverse economic scenario because European lenders only have to report those numbers on an informational basis starting next year, a spokeswoman for the central bank in Frankfurt said.

The new international standard approved by the Basel Committee on Banking Supervision won’t be fully binding until 2018.

Compliance Policy

Bank Breakup Plans Make No Sense After Bail-In, Denmark Says

Denmark said it will fight plans in the European Union to split banks deemed too big to fail, arguing that existing resolution rules make such a proposal moot.

After becoming the first EU country to force bank bondholders to share losses, Denmark is now lobbying the European Commission to ensure it doesn’t pile more rules onto the bank industry.

Business Minister Henrik Sass Larsen said Dec. 1 in an interview in Copenhagen that banks need flexibility. Denmark’s decision to test bail-in legislation in 2011 sent reverberations throughout its financial industry. Small lenders were shut out of funding markets while the country’s biggest banks suffered ratings downgrades. Since then, the industry has grown less reliant on capital markets, the Danish Bankers’ Association said Dec. 1.

Splitting banks represents “a different path” than one now taken and it’s too late for Denmark to go down that road, Larsen said. Instead, the EU should only make bank breakups an option for nations that need it, he said.

Compliance Action

Yandex CEO Backs Google Antitrust Probes as Search Share Drops

Yandex NV Chief Executive Officer Arkady Volozh said he supports antitrust investigations of Google Inc., whose Android operating system is helping it gain market share against Russia’s biggest search engine.

Android’s default options push users to Google services including search and maps, limiting consumers’ ability to choose such services from Yandex or other vendors, Volozh said in an interview at the company’s Moscow offices. The operating system has 85 percent of Russia’s smartphone market, according to researcher IDC.

Consumers are free to choose which applications and services they use on Android, Google’s press office said in an e-mailed response. Google’s mobile business is the target of an antitrust complaint to the European Union from a group representing Microsoft Corp. and Nokia Oyj.

The EU will probably open a formal investigation into Android if regulators don’t get “adequate” answers from Google to complaints, Joaquin Almunia, the organization’s then- antitrust chief, said in September.

Yandex, which is registered in Amsterdam and gets about 90 percent of its revenue from Russia, also will seek similar probes in other countries where it operates, including its home market, Ukraine and Turkey, Volozh said.