ECB Bank Stress Tests Pressure Stock Markets

Bank shares across Europe have fallen after details of planned healthchecks on the top lenders were unveiled.

The European Central Bank, which takes over supervision of leading eurozone banks next year, said the stress tests would unearth potential risks.

Banks with capital shortfalls may be required to bolster their balance sheets, the ECB said.

The Euro Stoxx index of big eurozone banks was down more than 2.5% in late morning trading.

ECB president Mario Draghi said: “A single comprehensive assessment, uniformly applied to all significant banks, accounting for about 85% of the euro area banking system, is an important step forward for Europe and for the future of the euro area economy.

“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,” he said.

The exercise will start next month, and will take about 12 months. The ECB said the aim was to “foster transparency, to repair and to build confidence”.

via BBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza