25 eurozone banks fail financial stress tests

World Today

The European Central bank (ECB) said 25 eurozone banks flunked financial-health tests designed to measure if they could withstand another economic crisis, though some have been strengthened this year. CCTV America’s Jack Barton reports from Brussels.

25 Euro-zone banks failed financial stress tests examined by European Central Bank

The European Central bank (ECB) says 25 Euro-zone banks flunked financial-health tests designed to measure if they could withstand another economic crisis, though some have been strengthened this year. CCTV America's Jack Barton reports from Brussels.

Nearly one in five of the 130 banks examined by the European Central Bank failed stress test aimed at exposing whether they could withstand another crisis.

The European Central Bank said the lenders were more than $31 billion short of the reserves they would need to survive another serious shock. Nearly half the banks that failed were said to have taken measures this year to restore their health.

“But there are then 13 banks that still have either to exactly apply their restructuring downsize as it is foreseen in their plans with the European commission, or they will have to come up with ways to increase their capital,” said Vitor Constancio, the ECB’s vice president of ECB.

No major banks failed the tests. The most troubled lenders were found in Greece, Cyprus, and Italy — the eurozone’s third largest economy — which registered nine failures. One of the biggest banks to fail the tests was Banca Monte dei Paschi di Siena, Italy’s third largest lender and the world’s oldest surviving bank. Its fate, along with the other 12 most vulnerable lenders, will be determined in the months ahead.

“These banks will have two weeks to present a plan to the ECB with corrective measures,” said economist Anthony Baert. “Part of these banks will have already taken corrective measures, so they will be safe. The other banks will have either six months or nine months to come up with the capital.”

Their future now rests largely on there being no more serious economic shocks to the bloc over that time period. The unprecedented health checkup on the eurozone’s biggest banks was carried out before the ECB assumes its new role next month as the bloc’s banking supervisor.