Winners and losers in Europe's bank stress test
European regulators revealed the results Sunday of an extensive health check of the region's top 130 banks, listing the weakest lenders that threaten to drag down Europe's economy.
All told, 25 banks failed the test, although 12 have already taken steps to shore up their finances.
Officials at the European Central Bank and European Banking Authority had been poring over bank finances for a year, and testing whether the banks had the strength to withstand a nasty shock, such as a spike in loan defaults or unemployment.
The aim was to weed out the weaklings that are hobbling Europe, or that could spark a new financial crisis in the event of another long recession.
Now these sickly banks will be forced to submit remedies, including possibly raising more money from investors.
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The health of the financial sector is of vital importance for the eurozone, since growth has evaporated again and the specter of deflation looms.
Most European companies rely on bank finance, unlike their U.S. peers who are more likely to issue bonds. Banks with shaky foundations are less likely to take risks with their lending, therefore potentially stifling investment and growth.
The results of the health check come just weeks before the European Central Bank assumes responsibility for supervising the eurozone's biggest lenders, a move intended to reduce the risk of future bank failures.
First Published: October 26, 2014: 7:26 AM ET
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