Europe's banks face moment of truth from ECB review

Thu Oct 23, 2014 9:18am EDT
 
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By Laura Noonan and Eva Taylor

LONDON/FRANKFURT (Reuters) - The euro zone's 130 biggest banks received the European Central Bank's final verdict on their finances on Thursday after a review aimed at drawing a line under persistent doubts about the health of the region's banking sector.

Most lenders already had a good idea of how they had fared in the region's most comprehensive-ever bank tests before the results landed around noon, after getting "partial and preliminary" figures from the ECB in recent weeks. But the final numbers were only agreed by senior regulators and supervisors late on Wednesday.

They will not be made public until 1100 GMT (7 a.m. EDT) on Sunday, and the ECB has asked banks not to make any disclosures until this point. The results will end months of uncertainty on what measures they will be forced to take to prove they can weather another economic crash.

Markets are expecting few surprises, and there have already been some reports of how banks have fared including a Tuesday report in Spanish newswire Efe which named 11 banks as having failed and briefly moved the euro.

The ECB's assessment, which is designed to allow the central bank to take over with a clean sheet when it becomes the euro zone's banking supervisor on Nov. 4, is based on the banks' financial positions at the end of 2013.

The banks have strengthened their balance sheets by almost 203 billion euros ($257 billion) since mid 2013, the ECB says, which implies that several banks which failed are likely to have already raised cash to deal with any shortfall.

Nonetheless, the outcome of the tests will be closely watched.

"This is the one chance that the ECB gets to once and for all step out of the shadow of all the national regulators and really claim its own independence," said Jacob Funk Kirkegaard, a senior fellow at the Peterson Institute in Washington D.C.   Continued...

 
The headquarters of the European Central Bank (ECB) are pictured in Frankfurt June 6, 2013. REUTERS/Ralph Orlowski