EU stress test results better than expected

| July 18, 2011
”EU

The European Banking Authority (EBA) said eight out of 90 European banks failed the recent stress tests.

The latest round of tests arose after last year’s failed to reveal the weakness among banks in Ireland and have been conducted to ensure banks have enough capital to cope with difficult economic situations, such as recession.

The euro zone debt crisis has resulted in a surge in borrowing costs in countries such as Spain and Italy and this has raised concern that banks are not able to withstand potential losses if the crisis worsens.

The latest series of tests were regarded as the strictest since the global financial crisis, which commenced almost four years ago.

However, the results were slightly better than anticipated after reports had suggested more than a dozen banks were expected to fail.

Five Spanish banks failed – these were: Catalunya Caixa, Pastor, Unnim, Caja3 and CAM. Two state-managed Greek banks failed (ATEbank and EFG Eurobank) while one Austrian bank (Oestereichische Volksbank) also failed the test.

However, 16 banks only just scraped through and the EBA said action should be taken to protect against losses.

Finally, the four UK banks passed the test – Royal Bank of Scotland, HSBC, Barclays and Lloyds Banking Group.

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