October 26, 2014 / 12:48 PM / 5 years ago

ECB stress test scenario did not consider deflation: Constancio

FRANKFURT (Reuters) - The European Central Bank’s landmark health check of the euro zone’s 130 biggest lenders did not take into account possible deflation, ECB Vice President Vitor Constancio said on Sunday.

“The scenario of deflation is not there (in the stress test scenario), because we don’t consider that deflation is going to happen,” he told journalists.

Twenty-five of the 130 biggest banks failed the stress test and ended last year with a collective capital shortfall of 25 billion euros, the ECB said earlier.

A survey by Goldman Sachs in September found that investors had expected banks to have to raise an additional 51 billion euros, taking into account capital increases that had already happened by August.

“That’s an indication that they (the banks) were healthier and more robust than many analyses in the recent past suggested,” Constancio said, when asked about the smaller than expected capital shortfall.

Constancio said corrections to data from the stress test before Sunday’s publication were “absolutely minor”. “It did not change (the results) materially overall. It was just minor corrections that happened,” he said.

Euro zone banks received the ECB’s final verdict on their finances on Thursday and had until Saturday to check the data for errors and approve publication for Sunday.

Constancio also said euro zone economic recovery would not be hampered by credit supply restrictions provided that there is enough aggregate demand, but added: “There is indeed a lack of aggregate demand in Europe.”

Reporting by Paul Carrel and Eva Taylor; Writing by Maria Sheahan; editing by David Stamp

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