Saturday, July 16th 2011 - 06:58 UTC

Eight out of 90 banks in Europe fail stress-test, five of them from Spain

Eight banks have failed Europe's bank stress test designed to assess whether they can weather another economic crisis while 16 banks barely passed, bank regulators said on Friday.

Bank of Spain governor Fernandez Ordoñez said results were “what we expected”

Those eight European banks not strong enough to withstand a prolonged recession need to raise 2.5 billion Euros in capital, an industry health check aimed at reviving investor confidence showed on Friday.

The stress test of 90 banks in 21 countries – representing 65% of the assets in Europe's banking sector – showed five banks in Spain, two in Greece, one in Austria and one in Germany failed the test, although the German result is disputed by the bank in question and is therefore not counted along the eight banks that officially failed the test.

Between five and 15 smaller lenders had been expected to fail the test. All big banks passed, as expected.

The IMF called for all “necessary measures” to be taken to “address weaknesses” at banks which failed, or narrowly passed the test.

The IMF has warned Europe that it is taking too long to rebuild its banking system and the threat of the Greek debt crisis spreading to bigger countries, such as Spain and Italy, was still very real.

“The outcome of the exercise reflects efforts made by individual institutions and national supervisory authorities to strengthen bank balance sheets, but more needs to be done,” the IMF said.

The Washington-based Fund praised the European Banking Authority (EBA), the regulator running the test, for its “strengthened methodology,” after the 2010 tests were judged to be too soft.

Germany's financial market regulator, BaFin, said that one of 13 German banks tested did not meet the requirements. It did not immediately identify the bank that flunked, but the only bank missing from the list of 12 that passed was the state-owned regional bank, Helaba, which had already said earlier this week that it would not pass.

Helaba, on its website, however, disputed the results of the test. Helaba then decided against the publication of its result, said the German finance ministry in a separate statement.

The EBA, earlier, had told Helaba that it did not accept that some of its assets counted as core capital. Helaba asserted that its core tier 1 capital ratio was 6.8%, well above the EBA's minimum mark of five percent. It was not clear on Friday how this dispute would play out when further details of the report are released.

The five Spanish banks that flunked the EBA stress test make up the bulk of the failures, but the Bank of Spain said they would not need additional capital because the sector was already being restructured.

Four regional savings banks failed the tests – Caja Mediterraneo (CAM), Catalunya Caixa, Unmin and Caja Tres – along with Banco Pastor. Seven other banks just barely reached the minimum requirement of the core tier 1 capital ratio of 5%. A total of 25 Spanish banks were tested, the largest number of any country. Bank of Spain governor Miguel Angel Fernandez Ordonez said the results were “what we expected.”

Greece's number two bank EFG Eurobank, failed the test, along with ATEBank, and pledged to boost its capital. ATEBank said it would proceed with a bond issue worth some 235 million Euros. ATEBank flunked the test with a capital ratio of minus 0.8%, the worst of any bank.

Austria’s Volksbank, which failed, said it was unsatisfied with the result of the test, but said it would have passed if its current efforts to strengthen capital ratios had been taken into account. It had a 4.5% capital ratio. Ireland's three main banks passed the test after being recapitalized following the Irish financial crisis.

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1 GeoffWard2 (#) Jul 16th, 2011 - 07:40 pm Report abuse
I suppose all the 'UK' banks have been re-capitalised by the taxpayers, so none appear in the listings.
All that remains is a debt per person/GDP of truely Icelandic proportions.
2 lsolde (#) Jul 17th, 2011 - 09:56 am Report abuse
Be careful what you say about lceland, Geoff or you'll have Jon Thinksson onto you with all the bad things that the British have done in the last 2thousand years!
3 ElaineB (#) Jul 17th, 2011 - 10:56 am Report abuse
Yeah, the four British banks they tested passed the stress test. As far as I am aware, the banks have all made pretty good recoveries and some are posting pretty healthy profits again. Let's us hope the tax-payer's money will be reimbursed asap as that is the plan.

The main problem atm is that the banks are reluctant to lend any of that money they are hoarding.
4 briton (#) Jul 17th, 2011 - 01:59 pm Report abuse
Icelandic lolly pops.
Who mentioned this polar bear iceberg,
Not eye said the fish.,
5 GeoffWard2 (#) Jul 17th, 2011 - 08:59 pm Report abuse
Thanks, Isolde.
Yes, it was a Jan(Jon?)-tease; just to remind him that the debt incurred per person in the UK is of the same order as that incurred by the Icelanders.

I guess the 'British' banks are building up the bigger working/contingency reserve necessary to avoid injections of public money in the coming years. They would argue that they can not do this and maintain loan levels at the same time - and who am I to argue with a bank!
6 briton (#) Jul 18th, 2011 - 08:29 pm Report abuse
British banks know exactly what’s coming, we all do.
And if they protect themselves now, we will not be to badly affected, but if our banks refuse, then i can assure you, that they will go down with the rest of the European glass waggons, and this time the public will not allow a bail out,
we all know that Italy, is on the list, and the others cannot cope, the French and Germans have given so much, and put their own banks right in the loop, that if it all sinks, they will get almost destroyed, costing them billions, for there corruption , and the UK will very soon have to make that all important and very long awaited choice,
Stay, or withdraw, before we sink with them,
7 Fido Dido (#) Jul 18th, 2011 - 10:04 pm Report abuse
“Let's us hope the tax-payer's money will be reimbursed asap as that is the plan”

Keep hoping, because it's not going to happen. Matter of fact they will continue to push to keep interest rate close to ZERO and not to forget for more “austerity measures” so that they receive more money at the cost of the people.

“The main problem atm is that the banks are reluctant to lend any of that money they are hoarding. ”

A problem for us, not for them, because that's how the make money. The more they lend, the more they make (from thin air).

The people of Iceland did something right. It said, screw you holland and the UK, it's not our debt (ICE SAVE debacle). You took the risk, you face the consequences.

All major European banks (plus the UK) are on the hook of a default in Greece, Spain Italy etc etc. I say let them, the banks, fail and we will be fine.
8 GeoffWard2 (#) Jul 20th, 2011 - 07:38 am Report abuse
“I say let them, the banks, fail and we will be fine.” (Fido #7)

Fido, do you know what happens when banks 'fail'?
9 lsolde (#) Jul 20th, 2011 - 09:22 am Report abuse
Fido, another lunatic like Jon-boy

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