Review of balance sheets aimed at boosting confidence before ECB takes over supervision of banks next year
The European Central Bank is to put top eurozone banks through rigorous tests next year in a review that aims to build confidence in the sector.
The ECB wants to unearth any risks hidden in balance sheets before it takes over supervision of the banks, as part of the plans for banking union designed to avoid a repeat of the euro debt crisis – which was exacerbated by massive bad property loans in countries such as Ireland and Spain.
However, analysts said that if the review reveals problems, it could undermine the very confidence it aims to bolster. Eurozone bank shares fell markedly at the prospect.
The ECB intends to scrutinise 128 top eurozone lenders, accounting for about 85% of the euro area banking system.
"We expect that this assessment will strengthen private-sector confidence in the soundness of euro area banks and in the quality of their balance sheets," the ECB president, Mario Draghi, said.
The ECB said it would conclude its assessment in October 2014 before assuming its supervisory role in November.
Banks will be required to make up for any capital shortfalls identified, the ECB said. A provisional list of banks to be reviewed includes 24 German lenders, 16 in Spain, 15 in Italy, 13 in France, seven in the Netherlands, five in Ireland and four each in Greece, Cyprus and Portugal.
European Central BankEuropean UnionEuropean monetary unionEconomicsEuropeBanking reformBankingFinancial sectorMario Draghitheguardian.com © 2013 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds |
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