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ECB to reveal European bank stress test details

The European Central Bank (ECB) is set to reveal more details of what its stress testing of European-based banks will consist of.

It is hoped the checks will help the organisation gain a greater understanding of the risks on the balance sheets of some of the leading eurozone banks. 

Known as the asset quality review (AQR), the process forms part of a broader examination of how banks will hold up to shock scenarios.

Today (3 February), the ECB is set to address some of the doubts expressed by some banking professionals about the tests.

It looks set to define when a loan has turned bad and what the next steps will be.

Last week, the European Banking Authority (EBA) revealed a series of key parameters for the stress tests it is involved in, which indicates that the new probe will be more detailed and stringent than previous investigations.

The two reviews will eventually feed into each other and their timings will overlap somewhat, but the overall result - spelling out the size of any capital shortfall - will be published in October.

By Asim Shah