Eurozone Stress Test Failures Show a Real Need for Non-Bank Solutions David Gustin - October 24, 2014 11:35 AM | Categories: Trade Credit Commentary | Tags: stress test Probably the most significant news for vendors that are creating assets for investors via their technology (procurement, einvoicing, networks, etc.) is the fact that banks lack capital. No more evident is that than 25 banks failing a Eurozone stress tests (19% surveyed) while up to 10 of those continue to have a capital shortfall. See this WSJ piece. This is extremely material. What it means is banks either raise capital, shed assets or both. This will penalize companies, banks and countries that banks deem require too much capital. Tom Elliott, deVere Group’s international investment strategist commented: “If the stress test is too strict, and fails too many banks, European tax payers are likely to end up footing the bill for re-capitalizing their balance sheets, since private capital will have all its worst fears about weak bank balance sheets confirmed. This will put pressure on government budgets at a time of regional austerity. German and Italian mid-tier banks look particularly vulnerable." These challenges in banking are creating new opportunities for vendors who can find investors that do not just include banks. We do not know the extent of bad loans that sit on balance sheets, but we know bank lending is impaired and lending growth is constrained because who they can lend to doesn’t appear to need the banks. This all contributes to weak economic growth. This is why I believe opportunities exist for those vendors that can augment information to transfer assets to investors., including companies these vendors help with early pay solutions. P.S. sign up for Trade Financing Matters newsletter here Related Articles IMF says Shadow Banks could endanger Global Financial Stability European Banks need to raise 700+ billion in new capital Discuss this: Cancel reply Your email address will not be published. Required fields are marked *Comment Name * Email * Website Notify me of new posts by email.