Major European banks are stable enough to withstand future economy worsening

image On Thursday it was reported that 22 largest banks in the European Union successfully passed stress test by financial supervisors who confirmed that they are stable enough to withstand future economy worsening.

Besides, European Union finance ministers and central bankers stated that the banks will likely have an extra $581.5 billion in losses this year and next year, if economic output fell below recent forecasts, and still none of the banks is expected to go under.

"Large banks appear sufficiently capitalized to head off a severe macroeconomic deterioration," they said after talks in Goteborg, Sweden. Jean-Claude Trichet, the head of the European Central Bank, stated that "our system is resisting in a way that is reassuring."

According to the EU statement the banks benefited from latest strong earnings and government financial support. The statement says the banks will jointly keep their capital buffers above a key global standard of banking health. Worldwide Basel II banking rules recommend a Tier 1 capital ratio of at least 4 percent. No EU bank would go beneath 6 percent, the tests showed, and on average would remain above 9 percent. The governments did not name the banks and do not plan to publish details of the test.


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