ECB Review Marks End of Europe Banking Crisis, Dijsselbloem Says

The European Central Bank’s stress test marks the passing of the region’s banking crisis, Eurogroup President Jeroen Dijsselbloem said.

“I definitely think the banking crisis is behind us,” Dijsselbloem, who is also Dutch finance minister, said in an interview with Bloomberg Television in The Hague yesterday. “I am never free of worry, so I do feel that banks have to keep on working managing their risks, strengthening their capital ratios where necessary also in the future.”

Twenty-five of 130 lenders tested failed the balance-sheet review led by the ECB, which found the biggest capital hole lurking in Italy. While the Frankfurt-based institution identified a total shortfall of 25 billion euros ($32 billion), most of that is covered by measures undertaken by the banks this year.

Dijsselbloem said he is “quite confident” the banks that failed will be successful in bringing in more capital. “The numbers are manageable. It is very important to get that done so that everyone can be rest assured that European banks are once again solid.”

Nine of the banks that failed are Italian, with Banca Monte dei Paschi di Siena SpA leading the pack with a capital gap of 2.1 billion euros. In Portugal, Banco Comercial Portugues SA was found to have a shortfall of 1.15 billion euros. The bank said in a statement yesterday after the ECB published its results that measures undertaken this year are sufficient to make up the difference.

Investor Appetite

Lenders found to be deficient have as many as nine months to fill the gaps. The Comprehensive Assessment, comprising the stress test and an Asset-Quality Review of balance sheets as of Dec. 31, 2013, was intended to close the door on half a decade of financial turmoil in the euro region before the ECB becomes the regional bank supervisor on Nov. 4.

“Banks have been quite successful since the start of this process in the summer of last year to go to capital markets,” Dijsselbloem said. “So there has been appetite to invest once again in European banks. I think the outcome of the stress test will also support that appetite.”

None of Europe’s largest banks failed. French and Spanish institutions passed the test, while no German lender was required to raise more capital.

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