Online Calculator | Seven Banks Try Desperately To Meet Capital Needs In Euro Stress Test But Fail

Seven Banks Try Desperately To Meet Capital Needs In Euro Stress Test But Fail

After the Greek debt crisis began to wreak havoc in European financial markets, a series of stress tests were devised to see whether European banks could handle any further shocks. After the tests were administered, it was determined that seven major European banks could not manage further strains as they did not have sufficient reserves to deal with one more crisis. The European Union bloc said it would give aid to the Greek debt crisis although numerous did better on the test than others. However, the seven that did not meet capital requirements were from 91 banks that were tested.

The Insufficient Seven

The banks that did not meet the capital requirements 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. These seven banks were unable to keep enough of Tier 1 capital, or cash reserves equal to 6 percent of the worth of their total assets. In case of another government defaulting, all banks needed to be able to withstand problems with the European financial system.

Being very careful about this

Stress tests like these cannot be too stringent nor too lax. This was done so confidence might be made between lenders and investors letting normal lending with banks start once again. The European Central Bank hopes to be able to start normal lending again and to keep away from bailout lending, reports the New York Times. Not a soul would trust results if they were to relaxed. Things might appear worse than they are with a test that is too strict.

Euro Zone loans

The European Union is credit restrained and will continue to be until the Greek crisis is fixed. 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.

Other places to discover information

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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