13 European banks fail stress tests

13 European banks fail stress tests

The European Central Bank (ECB) says 13 of Europe’s 130 biggest banks have failed an in-depth review of their finances and must increase their capital buffers against losses by €10bn.

An ECB statement said 25 banks in all were found to need stronger buffers – but that 12 have already made up their shortfall.

The remaining 13 now have two weeks to tell the ECB how they plan to increase their capital buffers.

ECB officials checked the worth of bank holdings and subjected banks to a stress test that simulates how their finances would fare in an economic downturn.

The exercise is aimed at strengthening the banking system so it can provide more credit to companies and boost the weak European economy.

The asset review and stress tests pave the way for the ECB to take over on November 4 as the Europe’s central banking supervisor.

It is supposed to make sure hidden troubles in the system are fixed before landing in the ECB’s lap.

The ECB’s new role is aimed at strengthening the euro currency union by toughening oversight of banks and keeping their troubles from dumping large losses on national governments’ finances through bailouts.

The ECB is taking over as supervisor for the biggest banks from national supervisors who were considered to be too likely to take it easy on their home banks and not step in to ward off problems. National supervisors will still look after smaller banks.

The test is also aimed at weeding out so-called zombie banks who are too crippled by hidden losses to make new loans to companies and have stayed in business thanks to tolerance from national supervisors and by rolling over loans that are not being repaid.

Banks are key to the functioning of the European economy because they are where most firms – especially small and medium-sized ones – go for the credit they need to expand and operate.

In the US, companies turn more often to financial markets by selling bonds to raise money.

Improving the flow of credit is key to getting the European economy out of its stagnation.

The 18 countries that use the euro currency showed no growth at all in the second quarter after four quarters of weak recovery from a crisis over too much government debt.

More in this Section

Construction industry wants all building sites to shut immediately Construction industry wants all building sites to shut immediately

Mobile companies to be given extra bandwidth to handle Covid-19 surge in callsMobile companies to be given extra bandwidth to handle Covid-19 surge in calls

Mortgage interest relief measures slammedMortgage interest relief measures slammed

Consumer spending 'may fall 10%' this yearConsumer spending 'may fall 10%' this year


Lifestyle

As the clocks go ahead, so does your style. Corina Gaffney picks your new wardrobe heroesFashion forward: Spring fashion as the clocks change

Des O'Sullivan gives an overview of the changed dates for much-anticipated salesAntiques & FIne Art: What events are put on hold for now?

Virtual auctions a welcome distraction, writes Des O’SullivanBuyers adapt with ease to bid online while grounded

I wish I could write us all back in time, when we could pop to the shops without fear, when grandparents did not have to wave through a window at their grandchildren.Michelle Darmody: Recipes with simple ingredients

More From The Irish Examiner