FRANKFURT (MNI) – The EU-wide stress-test exercise confirmed the
overall health of the European banking system and should further
contribute to its stability, the European Central Bank said Friday
following the release of results.

The central bank also emphasized that the small recapitalization
need uncovered by the tests is not a sign of easy testing conditions.

“The stress-testing exercise is comprehensive and rigorous. It
confirms the resilience of EU and euro area banking systems to major
economic and financial shocks. The exercise, therefore, represents an
important step forward in supporting the stability of the EU and euro
area banking sectors,” the ECB said in a statement.

The central banks said that any bank that had failed the tests and
required fresh capital “should take the necessary steps to reinforce its
capital position through private sector means and by resorting, if
necessary, to facilities set up by Member States.”

“The ECB welcomes the commitment made by national authorities with
regard to back-stop facilities to recapitalize the institutions that may
have fallen below the minimum threshold of 6% at Tier 1 level defined
for the capital ratio,” it added.

After the European authorities had been widely criticized for not
making stress tests tough enough, the ECB emphasized that the overall
limited need for fresh capital among Eurozone banks should not be read
as a sign of easy testing.

According to the Committee of European Banking Supervisors (CEBS)
EU banks only need a total of E3.5 billion in fresh capital as compared
to roughly $75 billion of fresh capital requirements that the U.S. tests
uncovered.

“It is important to underline that the stress test has been
undertaken after, in some cases, large-scale programs injected public
capital into several national banking systems and following a
substantial increase in the capital ratios achieved by EU banks since
last year as a result of retained earnings and new issuances,” the ECB
said.

–Frankfurt newsroom +49 69 72 01 42; e-mail: jtreeck@marketnews.com

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