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

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

European financial markets began to fail with the Greek debt crisis causing stress tests to be developed to see how European banks could manage more shock. After testing, seven major banks in Europe were shown to be too weak to deal with anything else if more crisis' were to appear. Some nations within the European Union bloc that pledged aid in the Greek debt crisis fared better than others. Only 7 out of the 91 tested weren't able to meet needs.

Source for this article - Seven banks can't meet capital needs 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 sure banks were secure in case the European Financial System had one more problem, including a government defaulting.

Being very careful about this

Stress tests like these cannot be too stringent nor too lax. The idea is to restore confidence among investors and lending institutions so that normal lending and lending between banks will resume. The European Central Bank hopes to be able to start normal lending again and to stay away from bailout lending, reports the New York Times. If the test were too easy, it would be hard to discover somebody 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.

Euro Zone trusts lending

Until the Greek crisis is fixed, European Union will be credit restrained and avoid all lending. 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.

Further Reading 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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