ECB’s Inspection Seen as Step to Unlock Lending

The European Central Bank’s unprecedented inspection of lenders’ books will help end a slump in lending that’s dogged southern Europe for years, said executives at some of the region’s largest banks.

“After the comprehensive assessment, when worries about capital levels are clarified, banks will be more open with credit,” said Giuseppe Castagna, 55, chief executive officer of Italy’s Banca Popolare di Milano Scarl. He’s targeting annual loan growth of about 5 percent through 2016, following a 4.2 percent drop last year.

ECB President Mario Draghi is using the yearlong review to restore confidence in the financial system before taking over banking supervision in November. The ECB studied the accounts of about 130 of the euro-area’s largest lenders to ferret out bad loans and ensure they have enough capital to withstand economic shocks. The results will be released on Oct. 26.

Bloomberg

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