Eight banks have failed Europe's bank stress
test designed to assess whether they could survive another economic
crisis, banking regulators said Friday.
A total of 90 banks -- representing 65 percent of the assets of
Europe's banking sector -- have been subject this year to the tests,
which leaders hope will help ease the tensions triggered by the
eurozone's debt crisis.
The eight banks -- one from Austria, five from Spain and two
from Greece -- fell short of having the required 5 percent core tier
one capital, the London-based European Banking Authority (EBA) said
releasing the report.
National bank supervisory bodies also need to pay close attention
to a further 16 banks.
Ahead of the release of the test results, the German public sector
bank Helaba said it was pulling out of the process to avoid failure,
claiming the methodology was unfair.
Helaba said its move came after the EBA rejected its plans to
boost its capital. The bank plans to publish its own results.
The banks were tested to establish how a dramatic 0.5 percent
contraction in economic growth, a 15 percent plunge in share markets
as well as trading losses from sovereign debt would impact their
operations.
Along with the results of the test, the EBA published details of
individual bank exposure to sovereign debt.
Last year, only seven banks failed the stress test. But since
then, the test has been tightened after Ireland's banking sector was
given a clean bill of health in the results published last year.
A few months later, the Irish banking sector imploded, resulting
in the country becoming the second member of the 17-nation eurozone
to apply for a bailout from the E.U.-led rescue fund.
The latest test results come at the end of another turbulent
period for European financial markets amid concerns that the debt
crisis gripping parts of the eurozone could spread to Italy and
Spain.
The failure of European leaders to hammer out a comprehensive
agreement to address the debt problem facing Greece has also
contributed to the market turmoil.
