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Mon, 27 Oct, 2014 12:00:12 AM FTimes- Xinhua Report, Oct 27  Daniele Nouy, Chair of the Supervisory Board of the Single Supervisory Mechanism, SSM, of the European Central Bank, ECB, addresses the media during a press conference following the announcement of the results of the comprehensive assessment (Stresstest) in Frankfurt / Main, Germany, on October 26, 2014. Nearly one in five banks subjected to a crunch financial health check by the European Central Bank have failed the test, though no major banks were among them, according to official data. Photo AFP-Lehtikuva. A total of 25 euro area banks failed the European Central Bank (ECB) health check designed to measure their ability to withstand another economic crisis, the ECB said on Sunday.
A capital shortfall of 25 billion euros was detected at 25 participant banks among the 130 largest eurozone banks whose assets have been reviewed, the ECB said, while announcing the results of a year-long examination of the resilience and positions of the eurozone's 130 largest banks as of Dec. 31, 2013.
"This unprecedented in-depth review of the largest banks' positions will boost public confidence in the banking sector. By identifying problems and risks, it will help repair balance sheets and make the banks more resilient and robust. This should facilitate more lending in Europe, which will help economic growth," said Vitor Constancio, vice-president of the ECB.
Constancio said at a press conference that 12 of the 25 banks have already covered their capital shortfall by increasing their capital by 15 billion euros in 2014 and the other 13 banks will come up with plans to address the shortfall.
Banks with shortfalls must prepare capital plans within two weeks of the announcement of the results and the banks will have up to nine months to cover the capital shortfall, according to the ECB.
"Economic recovery will not be hampered by credit supply restrictions," he said. "The lending is still going out."
Daniele Nouy, chair of the Supervisory Board, said, "the comprehensive assessment allowed us to compare banks across borders and business models."
The comprehensive assessment, which joined up the asset quality review and the stress test components, was aimed at strengthening banks' balance sheets, enhancing transparency and building confidence, according to the ECB.
The ECB announced in July 2013 that it would conduct the health check of the banks. The 130 banks that were examined accounted for assets of 22 trillion euros, representing 82 percent of total banking assets in the euro area.
The review also found an additional 136 billion euros in non-performing exposures in the banks.
The ECB will take over the supervisory task of euro area banks in November. The results comprehensive assessment have been widely considered as a test of the ECB's credibility.
The European Banking Authority (EBA) also published the results of 2014 European Union-wide stress test of 123 banks on Sunday. On average, EU banks' common equity ratio drops by 260 basis points, from 11.1 percent at the start of the exercise, after the asset quality reviews' adjustment, to 8.5 percent after the stress test, said an announcement by the EBA.
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