Euro Zone Banking Sector Better Prepared for Stress, Says ECB – Reuters

FRANKFURT (Reuters) – The largest banks in the euro zone are better positioned to withstand stress than they were two years ago, thanks to their increased capital reserves and improvements in their balance sheets, according to the European Central Bank (ECB). This assessment followed a recent stress test of the region’s 37 largest banks.

The banks entered the test with an average Common Equity Tier 1 (CET1) capital ratio of 13 percent, which is an increase from 11.2 percent recorded two years prior. In a hypothetical adverse scenario, they would maintain a CET1 ratio of 9.1 percent, which is also an improvement compared to the 8.6 percent observed in 2014, the ECB noted.

Furthermore, the ECB reported that all but one of the banks demonstrated CET1 capital levels significantly above the 5.5 percent benchmark established in the 2014 adverse scenario.