It sounds bad. Twenty-five of Europe’s 130 biggest banks failing ECB stress tests on capital reserves in cases of simulated market shocks in 2013.
However, half of those 25 banks have resolved those problems already, and Europe’s three biggest economies had not a failure between them. The other banks have until the end of next year to get out of trouble.
Two Italian banks, including Monte dei Paschi remain in intensive care, but one expert says Italy could have been much worse.
“We think that the comprehensive assessment outcome has confirmed the robustness and the soundness of the Italian banking sector, because if you add the stress test scenario to what has already occurred in the Italian economy, you have five consecutive years of recessions…Notwithstanding this extreme scenario, only two banks failed the test,” says the Director General of the Italian Association of Banks Giovanni Sabatini.
Cyprus and Greece also suffered with three bank failures each, but the Greeks are back in health and looking to see their economy grow again by the end of this year.
“In Greece, both banks and the government were happy with the results of the Comprehensive Assessment. The additional funds Greek institutions need to raise are minimal. Since the banks are now considered sufficiently capitalized, what is expected of them is to start financing the real economy, as the country still struggles to leave behind the six-year recession,” says euronews’ Symela Touchtidou.
“We believe this is a very good development, it will allow banks to lower interest rates on business loans, so that from the usual 5%, 6%, 7%, 8%, they will charge 2%- 3%, to match rates set in other countries on European companies. We also expect banks to deal with ‘red’, non-performing loans, so the Greek economy can exit the financing swamp it is trapped in and follow a new path of growth,” said the president of the Hellenic Federation of Enterprises Theodore Fessas.
The ECB’s stress tests are the first step in integrating all Europe’s banks into a banking union, something Europe’s leaders believe will strengthen the single market and the single currency, and better protect Europeans from future financial crises.