EU says eight European banks fail stress tests

15th July 2011, Comments 0 comments

Eight European banks have failed stress tests and together need an injection of 2.5 billion euros ($3.5 billion) to meet new capital requirements, the EU banking regulator said here on Friday.

Eight institutions -- including five Spanish and one German bank -- have failed to meet the European Banking Authority's (EBA) new capital requirements, the regulator said in a statement after carrying out crucial assessments on 91 banks across Europe.

The other two banks which failed the tests were not immediately known.

"The EBA's 2011 stress test exercise shows that eight banks fall below the capital threshold of 5.0 percent capital Tier One ratio over the two-year time horizon, with an overall capital tier one shortfall of 2.5 billion euros.

"In addition, 16 banks display a capital one tier ratio of between 5.0 and 6.0 percent."

The regulator wants every eurozone bank to reach its new recommended target of a core Tier One capital ratio of 5.0 percent.

The EBA wants each group to have liquid reserves -- which serve as an essential buffer against unforseen financial shocks -- totalling five percent of the lender's loans, bonds and securities.

© 2011 AFP

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