Highlights: 8 of 90 European banks fail stress test

By @ibtimes on

Following are highlights of the results of European bank stress tests which deemed 8 of 90 banks to have failed.

-- The European Banking Authority (EBA) said 8 banks had failed its stress test. The banks need to raise 2.5 billion euros ($3.5 billion) in capital, the EBA said. Five Spanish banks, two Greek banks and one Austrian bank failed the test.

-- The EBA said the banks that had nearly failed the test had until April 2012 to bolster their capital needs.

-- The EBA said that of the Greek sovereign debt held by the banks tested, 67 percent was in the hands of Greek banks, German banks held 9 percent and French banks 8 percent.

-- Greece's ATEbank and Eurobank EFG failed the stress test. Eurobank said it had no need to raise capital as measures had already been taken. Austria's Volksbanken also failed, but said it would have passed the test if the sale of its VBI arm and additional capital raising measures had been taken into account.

-- The Spanish banks which failed the tests were UNNIM, CAM, Catalunya Caixa, Banco Pastor and Caja 3. The Bank of Spain said no Spanish bank would need to raise capital.

-- The EBA said that on the basis of the results, it has issued its first formal recommendation stating that national watchdogs should require banks with capital below 5 percent to promptly remedy their capital shortfall though this won't be enough to address all potential vulnerabilities at this point.

-- Therefore the EBA has also recommended that national supervisory authorities request all banks whose core Tier 1 ratio is above but close to 5 percent, and which have sizeable exposures to sovereigns under stress, to take specific steps to strengthen their capital position, the EBA said.

These would include, where necessary, restrictions on dividends, deleveraging, issuance of fresh capital or conversion of lower quality instruments into core tier 1 capital.

-- The EBA said that taking the end of 2010 as a cut-off point, 20 banks would have capital below 5 percent over the two-year test with a total shortfall of 26.8 billion euros but the final number of test failures fell to eight because 50 billion euros of capital was raised between January and April this year.

-- The EBA said it will monitor the implementation of its two recommendations and report in February and July next year.

-- Of the eight banks, one Greek bank had a ratio of2 percent, 3 Spanish banks had a ratio of 4 percent, 2 Spanish banks with ratio of just under 5 percent. One Greek bank andone Austrian bank had ratio of just under 5 percent, the EBA said.

-- Bank of Portugal says all four Portuguese banks have passed financial stress tests

-- Bank of France says French banks pass European stress tests

-- Bundesbank says no German banks fail test. German Finance Minister Wolfgang Schaeuble said no further measures were necessary for German banks after the stress tests, adding that the results were a positive signal.

-- Bank of Italy says all five Italian banks taking part passed by large margin. The Italian Treasury said it is committed to safeguarding the financial stability and strength of the country's banks ($1 = 0.708 Euros)

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