How healthy are Europe's banks?

Everything you need to know, in four paragraphs

(Image credit: (Ralph Orlowski/Getty Images))

Could this be the "beginning of the end" of Europe's financial woes? asked Jason Karaian at Quartz. With global markets increasingly concerned that the Continent is teetering on the brink of another recession, the European Central Bank delivered a bit of good news last week, releasing the results of stress tests that scrutinized banks' ability to withstand another major financial crisis. "Embarrassed by three previous tests that proved far too tame," regulators spent the better part of a year poring over bank balance sheets in "unprecedented detail." Overall, 25 of the 130 banks that were tested "flunked." But in the 10 months since the ECB finished its detective work, 12 of the banks "have already raised enough capital to give them a passing grade." The remaining 13 failing banks need to raise a relatively modest $12 billion over the next year to bolster their financial footing.

It's "a Goldilocks result," said David Reilly and Helen Thomas at The Wall Street Journal. The outcomes of the tests aren't so bad that they "raise fresh doubts about the financial sector," and they aren't so rosy that they prompt questions about the accuracy and thoroughness of the tests. The results also "confirmed investors' long-held suspicions: Failures were concentrated in crisis-hit euro zone markets like Cyprus, Greece, and Italy." No big surprise there, said Tim Worstall at Forbes. Out of the 25 banks that failed, nine were based in Italy, whereas all the major banks in France and Germany emerged unscathed. Italy has a long way to go until its banking sector could be considered healthy, but the Italian banks that fared poorly, like Monte dei Paschi, "we already knew had serious problems." Even the worst off "failed only by a slim margin and can take some fairly simple (and cheap) steps to put matters right."

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.


Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up
To continue reading this article...
Continue reading this article and get limited website access each month.
Get unlimited website access, exclusive newsletters plus much more.
Cancel or pause at any time.
Already a subscriber to The Week?
Not sure which email you used for your subscription? Contact us

Sergio Hernandez is business editor of The Week's print edition. He has previously worked for The DailyProPublica, the Village Voice, and Gawker.