European Central Bank Vice President Vitor Constancio says 25 banks have failed landmark health checks at the end of 2013. Rough Cut (no reporter narration).
ROUGH CUT (NO REPORTER NARRATION). STORY: Some 25 European banks failed a "stress test" of their capital strength conducted by European authorities, the European Central Bank Vice President, Vitor Constancio, announced on Sunday (October 26). Roughly one in five of the euro zone's top lenders failed landmark health checks at the end of last year but most have since repaired their finances, the ECB said. "A total of 25 billion capital short falls were identified across 25 participating banks as a joint result of the AQR and the stress test. The AQR itself resulted in a gross impact on assets values in needs of adjustments by 48 billion, 37 billion of which did not generate a capital short fall. So if you add up the 37 with the 25 capital short fall you get the overall impact on the banks of 62 billion coming from the comprehensive assessment," Constancio told at a news conference in Frankfurt. The ECB found the most critical problems to be in Italy, Cyprus and Greece but concluded that banks' capital holes had since chiefly been plugged and that only 10 billion euros remained to be raised. Italy's financial sector faces the biggest challenge with nine of its banks falling short. Monte dei Paschi had the largest capital hole to fill at 2.1 billion euros, even after its money raising efforts this year. The exercise provides the clearest picture yet of the health of the euro zone's banks more than seven years after the eruption of a financial crisis that almost bankrupted a handful of countries and threatened to fracture the currency bloc. Although investors may take heart, it remains to be seen whether the exercise can spur banks to lend more as the region's economic growth stutters to a virtual halt. While 25 of the euro zone's 130 biggest banks failed the health check at the end of last year with a total capital shortfall of 25 billion euros, a dozen have already raised 15 billion euros this year to make repairs. Alongside Italy, regulators said three Greek banks, three Cypriots, two from both Belgium and Slovenia, and one each from France, Germany, Austria, Ireland and Portugal had also missed the grade as of end-2013. It is the fourth attempt by Europe to clean the stables of its financial sector and has been billed as much the most rigorous. Previous efforts failed to spot problems, giving lenders in Ireland a clean bill of health shortly before a banking crash drove the country to the brink of financial collapse.