Paradox of Bullet-Proof Banks in the Eurozone is Anti Free-Market since many Individual Risk-Takers will be Denied Credit while Large Cos will be Favored and continue to get Larger

Capitalist Pig Bob: When will the Germans say 'enough is enough' and rebel against the ECB? 

================================================================

FRANKFURT—Banks in the euro zone will have little advance notice concerning the results of the European Central Bank's review of their balance sheets before the results are publicly communicated in late October, the ECB said on Thursday.

"Banks will be informed of the full and final results only shortly before they are communicated to the markets," the ECB said, although the ECB and national regulators will discuss partial findings with banks ahead of time.

The asset review, and separate stress test on how balance sheets of 128 banks in the euro zone respond to different economic scenarios, are central planks of the ECB's preparations to become the single supervisor of the region's banks in November.

ECB officials hope the reviews will provide more clarity on the state of European banks and address shortfalls where they occur. If the results are deemed credible by financial markets, then banks may be more willing to extend new credit to households and businesses.

"As we finalize this tough and rigorous exercise, we are doing our utmost to prepare for a smooth disclosure process," said Daniele Nouy, chair of the supervisory board, said in a statement.

Previous stress tests by European regulators failed to restore confidence in the banking sector. The ECB has added a new wrinkle to beef up its review: the results of the balance sheet review will be incorporated into stress tests.

"When assessing banks' own data and the outcomes of their internal models, the ECB-led teams will challenge them with calculations of their own," the ECB said.

"This is to ensure the credibility of the comprehensive assessment and will apply to both the (asset quality review) and the stress test," it said.

Once results of the tests are known, banks must submit their capital plans to the ECB bank supervisory body in November.

Write to Brian Blackstone at brian.blackstone@wsj.com and Todd Buell at todd.buell@wsj.com