Spain 'confident' ahead of bank stress test results

15th July 2011, Comments 0 comments

Spain's government said Friday it is confident that reforms to its banking system have left the country's lenders strong enough to withstand any new shock.

The European Union will later on Friday publish the results of major stress tests on Europe's troubled banking sector which aim to reveal which banks, if any, would not be able to withstand a fresh shock to the financial system.

"We are confident in the measures which we adopted," government spokesman Jose Blanco told a press conference after a weekly cabinet meeting.

"The Spanish banking system is undergoing one of the biggest restructurings in Europe.

"This will have consequences, it will reinforce the solvency of our financial system and give it a solvency that is able to withstand any type of stress in the future, no matter how hard or difficult," said Blanco, who is also public works minister.

Spain's lenders, especially its regional savings banks which account for about half of all lending in the country, have been heavily exposed to bad debt since the collapse of the property sector at the end of 2008.

The government and Bank of Spain have forced a wave of consolidation in the sector and are requiring banks to quickly increase the proportion of rock-solid core capital they hold to above international norms.

Under new government regulations, the banks must raise the proportion of core capital they hold to 8.0 percent of total assets from the current six percent, or to 10 percent if they are not listed on the stock exchange.

The European Banking Authority, the EU's London-based regulator for the financial sector, has carried out assessments on 91 banks representing 65 percent of the sector and will publish its findings at 1600 GMT.

© 2011 AFP

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