The European Central Bank has geared up for a year-long audit of the strength of big eurozone banks to withstand crisis, wielding new policing powers which hit bank shares hard.
The ECB says it will start next month to check the balance sheets of 124 eurozone banks and "stress-test" them before it becomes the sector's supervisor late next year, part of the bloc's multi-pronged response to the eurozone debt crisis.
The exhaustive review will seek to sniff out risky loans and assets, insufficient capital and other dangers that would make banks more vulnerable to financial shocks.
The list of banks accounts for 85 per cent of the eurozone banking system and includes the sector's biggest names such as Deutsche Bank, BNP Paribas, UBS, ABN AMRO, Banco Santander and the Bank of Cyprus.
European banking shares were hit hard on the announcement, with traders wary of what might be exposed in asset tests that are expected to be more thorough than previous ones managed by national authorities.
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In Germany, Deutsche Bank sank 1.84 per cent and Commerzbank lost 2.86 per cent, while in London, RBS fell 2.93 per cent.
ECB president Mario Draghi called the asset review "an important step forward for Europe and for the future of the euro area economy".
"Transparency will be its primary objective," he said in a statement.
"We expect that this assessment will strengthen private sector confidence in the soundness of euro area banks and in the quality of their balance sheets."
The "comprehensive assessment" will look at "key risks", review the quality of bank assets and include "a stress test to examine the resilience of banks' balance sheets to stress scenarios", the ECB said.
Aside from building transparency and taking any necessary corrective actions, the exercise aims "to assure all stakeholders that banks are fundamentally sound and trustworthy".
The review will look at December 31, 2013 data and be carried out together with national authorities and supported by an external consulting firm.
