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FRANKFURT — The European Central Bank detailed the parameters of a widely anticipated review of eurozone banks Wednesday, promising that it would thoroughly examine lenders’ ability to withstand shocks and their exposure to risk.
Mario Draghi, ECB president, said the review, which will begin in November and take a year, would be “an important step forward for Europe and for the future of the euro area economy.”
The review of 130 large lenders is intended to address one of the underlying problems in the eurozone economy by forcing weak banks to deal with problems such as bad loans or insufficient capital. Credit remains tight in much of Europe, in part because many banks are burdened with bad loans or unable to raise money on capital markets. Without credit a vibrant recovery is almost impossible.