EU unveils results of bank stress tests

| July 25, 2010
EU unveils results of bank stress tests

The results of the European banking stress tests have been published over the weekend with just over half a dozen of the 91 banks failing the tests.

The Committee of European Banking Supervisors (CEBS) said seven of the banks failed the tests, which were conducted to ease increasing anxiety over Europe’s finance sector.

The banks which failed included five Spanish banks – Diada, Espiga, Banca Civica, Unnim and Cajasur. The other two were Germany’s Hypo Real Estate and Greece’s ATEbank.

However, there was concern for Spanish banks since many of them have been heavily exposed to Spain’s property market crash.

The tests assessed whether banks are strong enough to cope with any future economic crises, or to establish whether they require a cash injection to keep it afloat.

The CEBS said the seven banks would need a total of €3.5 billion (£3 billion) of fresh capital to meet the standards required.

Commenting on the results, CEBS chairman Giovanni Carosio, said: “[The failed banks] will have to agree with their respective supervisors a plan over a given time period which will explain how this weakness will be resolved.”

Meanwhile, the UK’s big four banks (Royal Bank of Scotland, Lloyds, HSBC and Barclays) were also tested and passed.

The Financial Services Authority which carried out the tests on the UK’s banks on behalf of the EU said: “As expected, the outcomes of the stresses demonstrate the preparedness and resilience of the UK banks under unlikely adverse economic scenarios.”

Meanwhile, speaking on behalf of the five Spanish banks which failed the test, the country’s central bank said: “The exercise confirms that the Spanish banking system is sound, and in turn substantiates the savings bank restructuring and recapitalisation process pursued over the past twelve months by the Bank of Spain.”

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