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ECB gives initial backing to bank capital plans

The headquarters of the European Central Bank (ECB) are pictured in Frankfurt June 6, 2013. REUTERS/Ralph Orlowski

FRANKFURT (Reuters) - The European Central Bank gave initial approval to the plans of 13 banks to plug capital holes discovered in health checks, it said on Friday, bringing a landmark examination of the sector almost to a close. "The Supervisory Board today endorsed the last set of capital plans from the banks where the comprehensive assessment detected a capital shortfall," a spokesman said in a prepared statement. The plans will now go to the central bank's governing council for final sign off, he said. "At that point, all 13 banks with remaining capital shortfalls have six or nine months (depending on its origin) to cover the shortfalls and implement their plans," he said. In October, the ECB failed roughly one in five of the euro zone's top lenders in its health checks but found that most had since repaired their finances. Painting a brighter picture than had been expected, the ECB found the biggest problems in Italy, Cyprus and Greece. However, it concluded that banks' capital holes had since chiefly been plugged, leaving only a modest 10 billion euros to be raised. Italy faces the biggest challenge, with nine of its banks falling short and two still needing to raise funds. The test, designed to mark a clean start before the ECB takes on supervision of the banks next month, said Monte dei Paschi (BMPS.MI) had the largest capital hole to fill at 2.1 billion euros (1.33 billion pounds). The exercise provided the clearest picture yet of the health of the euro zone's banks more than seven years after the eruption of a financial crisis that almost bankrupted a handful of countries and threatened to fracture the currency bloc. While 25 of the euro zone's 130 biggest banks failed the health check at the end of last year with a total capital shortfall of 25 billion euros, a dozen had already raised 15 billion euros this year to make repairs. (This version of the story was refiled to add graphics on stress tests) (Reporting By John O'Donnell; editing by Paul Carrel, Larry King)