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Stress testing households and companies

Last sunday, the ECB published the results of its stress test. Via Janis Varoufakis, the view of Klaus Kastner, a former banker: bankers did take it seriously but it’s not stringent enough. But too much has already been written about banks. Fortunately, central banks do not just publish data on banks but also on households and companies. What kind of financial stress do these data show?

1) The exemplary Irish financial statistics summary chart pack shows that the amount of non-performing mortgages is, though slowly declining, still very high.

2) Italian data show non performing loans, especially of non-financial companies, which despite an already high level are still rapidly increasing. Bad household loans are also increasing, though at a lower rate (look here, p. 30).

3) Spanish data (look here, especially p. 26-28) show a very considerable drop in credit advanced to non-financial companies while there seems to be quite a bit of debt restructuring. Despite this, the amount of non-performing loans is still increasing for all sectors of the economy (data: end of 2013) and the rate of growth of non-performing loans has been 20 to 40% for years in a stretch. interestingly, loans to Portuguese companies and households are much more ‘doubtful’ than loans to South-American countries.

Summary: financial stress for households and non-financial companies in Ireland is still high, in Italy and Spain it’s still increasing.

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