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Europe to stress-test its banks again, but none can fail

Published 05/11/2015, 12:26
Updated 05/11/2015, 12:26
© Reuters. Outside view shows the ECB headquarters in Frankfurt

© Reuters. Outside view shows the ECB headquarters in Frankfurt

By John O'Donnell

FRANKFURT (Reuters) - Europe's banks will be tested to measure their financial resilience to adverse conditions next year, regulators said on Thursday, although none can fail as there will be no minimum capital hurdle.

The exercise follows many years of annual tests to assess the capital strength of the banks following the financial crash, but it marks a new phase where banks are not immediately forced to recognise and plug any newfound financial holes.

Some criticised earlier tests as too generous such as when they gave Irish lenders a clean bill of health just months before the country almost went bust due to their difficulties. Greece's banks received a thumbs up as recently as last year before political turmoil required a fresh examination last week.

In the latest round of checks, which will be launched in February next year, 53 banks will be assessed. The European Banking Authority, which sets the standards for the examination, said the process would challenge banks' capitalisation plans.

The London-based authority said it would also make it easier to compare the resilience of banks across the European Union. The European Central Bank will probe banks in 10 of the 19 countries using the euro.

© Reuters. Outside view shows the ECB headquarters in Frankfurt

To see the list of banks being tested, see pages 93 and 94 in the following EBA document: https://www.eba.europa.eu/documents/10180/1259315/DRAFT+2016+EU-wide+ST+methodological+note.pdf

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