"In case of need", the banks on which critical issues will be found will be able to take advantage of "government support". This is what the EU finance ministers explained following today's Ecofin council. The tests serve to test the ability of banks to absorb any losses deriving from negative market developments. Those that lack the necessary capital are invited to make up for these shortcomings, including through recourse to forms of public support. The banks, which according to the stress scenario will show a core Tier 1 above, but close to 5%, will be subjected to a review to ensure that there is no unexpected deterioration of their capital position.
The stress tests will concern 91 institutions involving 65% of the work of the European banking sector. According to Mario Draghi, governor of the Bank of Italy, all banking institutes will pass the test with important margins.
