File - A logo of the European currency Euro stands in front of the headquarters of the European Central Bank (ECB) in Frankfurt am Main on June 6, 2013. (AFP PHOTO / DANIEL ROLAND)
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Europe banks prepare for new ECB testsThe tens of billions of euros that eurozone banks set aside for loan losses in their latest annual accounts may have substantially reduced the chance of institutions failing ECB stress tests in the next few months.A total of 71.5 billion euros ($99.3 billion) was set aside in 2013 by the 20 biggest listed banks involved in the exercise, a Reuters analysis of their new annual reports shows. If replicated across the 128 lenders subject to tests the European Central Bank aims to complete by October, it could mean no bank will fail or be forced to raise large amounts of new capital. Such limited consequences helped discredit previous tests by EU financial watchdog the European Banking Authority – one reason the ECB is keen to show that its new exercise will truly be tough on the region's banks.Using a slightly different tool, the ECB requires banks have a ratio of at least 8 percent.If the ECB concludes the loans are overvalued, this will push capital ratios down.
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