Prime News: ECB seeks to test banks’ capability to weather rate shocks

The European Central Bank unveiled it will put to the nto test the capacity of banks to withstand rapid changes in interest rates.

The central bank revealed Tuesday details of its latest series of stress tests to find out how much capital banks would have left should rates abruptly surge or drop and how much they would generate under various circumstances over three years.

It will have six likely situations including a replay of the aftermath of Lehman Brothers’ bankruptcy in 2008 when long-term rates plunged below short-term rates.

All 110 banks have until April to provide its figures, which will then integrated into the central bank’s yearly capital demands in July.

The ECB mentioned rates would be maintained at current levels for the duration of the year. However, inflation has been recuperating in the eurozone.

The material has been provided by InstaForex Company – www.instaforex.com

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