25 Banks Fail ECB Stress Tests
The euro began the week strong at $1.2689 at 7:50 GMT after making some gains over the weekend following the European Central Bank’s release of its stress test data.
The common currency rose moderately as some investor confidence began to return to the region.
The ECB and the European Banking Authority announced on Sunday that only 12 eurozone banks will be required to raise funds and sure up their balance sheets.
The dozen banks that missed the mark on the stress tests will need to find a total of 9.5 billion euros over the next nine months, which is in line with what most investors had forecast.
The stress tests were considered a positive step for the eurozone, where the financial system is known for being shrouded in uncertainty.
By using consistent, more rigorous measures for all of the regions banks and making the results public, the ECB is hoping to create more transparency and gain back investors’ trust in the bloc’s financial system.
While the results were mostly positive, The Wall Street Journal reported that many are still skeptical about the region’s financial health.
Though only 12 banks failed the tests, 25 financial institutions didn’t actually pass but have already raised the 24.6 billion necessary to fix the problem. Furthermore, several of Germany’s lenders only passed marginally, something that will likely draw criticism.
The stress testing is only the beginning as the ECB prepares take control of the bloc’s entire financial system on November 4.
While some are nervous about how that will affect individual nations’ control over their own banking systems, the ECB is hoping to streamline the eurozone’s financial system and prevent another financial crisis by breaking the link between governments and banks.
© 2016 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.