Eight out of 90 European banks have failed stress tests carried out by the European Banking Authority (EBA) and designed to ensure they can withstand another financial crisis. A further 16 banks were in the danger zone.
The EBA called on national financial regulators to ensure that capital shortfalls would be quickly resolved. Five Spanish banks failed, as well as one in Austria and, perhaps surprisingly, only two in Greece. Germany’s Helaba bank pulled out of the stress tests, effectively also failing.
In Austria, the Oestereichische Volksbank failed the test, while in Greece two state-controlled banks – ATEbank and EFG Eurobank – fell short.
In Spain, Catalunya Caixa, Pastor, Unnim, Caja3 and CAM failed, with seven others just scraping through the test.
A key benchmark for passing the test was whether the banks have at least 5% “core tier 1” capital, which describes the best form of capital a bank can hold to make up any losses. However, some see the results of these tests as reassuring, others believe it shows that the tests are not really credible, epecially as they do not take into account the increasingly likely situation where, for example, the Greek banks default.