Seven banks can't meet capital needs in Euro stress tests

Stress tests were developed to test European banks after the Greek debt crisis made for a lot of problems in European financial markets. After testing, seven major banks in Europe were shown to be too weak to deal with other things if more crisis’ were to appear. The European Union bloc said it would give aid to the Greek debt crisis although many did better on the test than others. Only 7 out of the 91 tested weren’t able to meet requirements. Source of article – Seven banks can’t meet capital requirements in Euro stress tests by Personal Money Store.

Seven banks with problems

The banks that did not meet the capital needs were Hypo Real Estate Holding AG in Germany, ATEBank in Greece, and Unnim, Espiga, Diada, CajaSur and Banka Civica, which are all Spanish, according to the Wall Street Journal. None of the seven banks could keep enough cash around to represent 6 percent of the worth of their total assets. The purpose of this was to make certain banks were secure in case the European Financial System had one more problem, including a government defaulting.

Being very careful about this

The test that is administered has to be perfect. This was made so lending can begin again since investors and lending institutions will have confidence. The European Central Bank hopes to be able to start normal lending again and to avoid bailout lending, reports the New York Times. If the test were too easy, it would be hard to discover someone to believe it. If the tests are thought to be too strict, then the entire European banking system will appear to be on the verge of collapse.

Lending in the Euro Zone

European lending is constrained, and until the Greek crisis is resolved, the European Union is going to be somewhat credit constrained. The U.S. dollar was being valued as higher than the Euro because of this crisis although the dollar is losing value with the U.S. economy being so unstable.

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Wall Street Journal
online.wsj.com/article/SB10001424052748703294904575384940544522582.html?mod=WSJ_business_LeadStoryRotator
New York Times
nytimes.com/2010/07/24/business/global/24stress.html?pagewanted=1 and amp;ref=business