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Banco Popolare rejects Morgan Stanley suggestion of stress test shortfall

denounced a Morgan Stanleyanalyst report that suggested that the upcoming European bank stress test mightreveal a capital shortfall at the Italian lender.

Accordingto the analysts, the stress test results, which the European Banking Authority hassaid it will reveal early in the third quarter, will prompt Italian authoritiesto recapitalize the country's banks, IlSole 24 Ore wroteJuly 6. Morgan Stanley reportedly added that Banco Popolare's and 's commonequity Tier 1 ratios are in danger of falling below 5.5%, the minimum requestedby the EBA in 2014.

The analystssaid Banco Popolare's CET1 ratio could be as much as 1.6 percentage points belowthe 5.5% threshold, although they added that the lender's recent and its planned with Banca Popolare di Milano Scarl might reduce the need foradditional capital, Il Sole 24 Ore added.

The EBA has said the 2016 stress test will not include a pass-failbenchmark, but that the results will inform the ECB's Supervisory Review and EvaluationProcess, through which it sets capital mandates for individual banks.

In asame-day statement, Banco Popolare said Morgan Stanley's approach had been "flawed"and the research conducted "with disconcerting superficiality, basedon reconstructions and methodologies that are not even specified." This, itadded, led to "severely unfounded" conclusions that "in no way whatsoever"reflected its own data.

"For this reason, Banco Popolare reserves to undertake everyappropriate action to protect its reputation and its shareholders," the lendersaid, highlighting that it usually does not comment on analyst reports but feltcompelled to do so in this case.