16 Jul 2011

Eight banks fail EU stress test

4:13 pm on 16 July 2011

Eight European banks have failed stress tests designed to ensure they can withstand another financial crisis.

Checks on 90 banks were done by the European Banking Authority, which says another 16 banks are in the danger zone.

The EBA said these 16 only just passed the tests. All the banks should ''promptly'' take steps to strengthen their financial cushion, it said.

The BBC reports five Spanish banks failed, as well as one in Austria and two in Greece.

The banks that failed will spend the weekend working with their governments on plans to increase their financial strength.

The results were issued by the EBA on Friday, and on Wednesday, Helaba of Germany pulled out of the stress tests, effectively making it the ninth bank to fail.

The EBA has called on national financial regulators to ensure that problems can be quickly resolved.

As expected, the four UK banks passed the test - Royal Bank of Scotland, HSBC, Barclays and Lloyds Banking Group.

The tests - which are in their second year, are designed to identify weak banks and ensure they are made robust enough to survive a possible default on the government bonds of heavily indebted countries such as Greece.

Last year, both Irish banks tested - Bank of Ireland and Allied Irish Bank (AIB) - were given a clean bill of health in the stress test, but just months later AIB needed a government bail-out, the BBC reports.

The EBA had said that this year's tests would be tougher than the first round.