Stress tests were developed to test European banks after the Greek debt crisis made for a lot of troubles in European financial markets. Seven major European banks were tested and failed showing they wouldn’t be able to handle any more issues with the economy. Some did better than others within the European Union Bloc that said they’d help with the Greek debt crisis. Only 7 out of the 91 tested weren’t able to meet needs. Resource for this article – Seven banks cannot meet capital requirements in Euro stress tests by Personal Money Store.
The Insufficient Seven
The banks which were unable to meet needs were, the Wall Street Journal reports, Hypo Real Estate Holding AG in Germany, ATEBank in Greece, and Unnim, Espiga, Diada, CajaSur and Banka Civica. All seven banks had troubles keeping enough Tier 1 capital to equal 6 percent of the worth of their assets. In case of one more government defaulting, all banks needed to be able to withstand troubles with the European financial system.
Thin line to walk
Stress tests like this have to be exactly correct. The idea is to restore confidence among investors and lending institutions so that normal lending and lending between banks will resume. The New York Times reports the European Central Bank wants to keep away from bailout loans so it can start lending again. If the tests are too lax, not a soul will believe the results. Things might appear worse than they’re with a test that is too strict.
Lending within the Euro Zone
The European Union is credit restrained and will continue to be until the Greek crisis is fixed. The Euro was becoming less valuable than the U.S. dollar although now with the U.S. economy staying low, the dollar is slipping too.
Find more info on this topic
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
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