Comment on European authorities aim to purge weak banks

European authorities aim to purge weak banks

The purpose: leave banks in better shape to lend to companies, enabling businesses to expand production, hire people and get the economy growing again. A key difference this time is that the ECB has been able to take a detailed look at bank's loan books — information not available for the earlier tests, which relied on banks to say what their assets were worth. Michael Schroeder, professor of asset management at the Frankfurt School of Finance & Management, said that banks started adding capital and shedding risky loans and investments in the year leading up to the end of 2013, the date the ECB review takes as its starting point. "The first signs that we see are that it was an incentive to improve," said Schroeder. [...] I would say it's already a success. The eurozone desperately needs growth and lower unemployment to keep climbing out of its troubles with too much government debt.

 

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