Eurozone Banking Still In Need Of Help
The euro slipped back below $1.35 at the end of the week after weak lending data from the eurozone indicated that the region's recovery hasn't hit the region's banks just yet. The common currency traded at $1.3496 at 6:35 GMT on Friday morning.
The Wall Street Journal reported that Thursday's lending data showed that the region's banks were not willing or able to lend to corporations in August. Credit for businesses was down by 12 million euros and private sector loans were down by 2.0 percent. Figures for loans to households was the only bright spot, which increased by 4 million euros.
Data from individual eurozone nations was just as bleak. Loans to the private sector were lost 0.3 percent in Greece. Germany, the bloc's largest economy saw private sector loans down about four percent in August. The figures were disappointing as Germany has recently posted a spate of positive data, including increased business sentiment in September, which many took as an indication that the nation was on its way to recovery.
The lending issues highlight the need for eurozone banking stability in order to move the recovery forward. The European Central Bank is planning an Asset Quality Review, in which it will check the balance sheets of eurozone banks and conduct stress tests. The review will likely boost confidence in the banking sector and ease banks' funding conditions.
However, it could have a negative impact on lending in the short term, as many banks will be forced to restructure their balance sheets in order to pass the assessment.
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