Spain's Pastor, Catalunya to fail bank test

 

Two Spanish banks will fail a European-wide stress test and blamed the regulator for ruling out the use of certain provisions for bad loans as capital.

Pastor and CatalunyaCaixa said they fail the test under the European Banking Authority's criteria. The EBA is testing 91 lenders and will release results at 1600 GMT on Friday.

But the banks said they would pass the test if they were allowed to include generic provisions, which the EBA has ruled out as part of a stricter definition of capital in this year's test.

"Banco Pastor will pass the stress tests under whatever macroeconomic scenario, without any kind of additional measure, once existing provisions are incorporated in the end-2010 balance sheet and the necessary convertible bonds are issued," Pastor said in a statement to the stock market regulator.

Savings bank CatalunyaCaixa later released a similar statement. Both banks worded their releases as a pass, but only if they could count the provisions as capital.

Economy Minister Elena Salgado said this week some Spanish banks would fail the tests because provisions could not be counted as core capital under the most stringent testing level.

Spain's financial system held 27 billion euros in generic and other provisions against doubtful and bad loans due to their exposure to the burst property bubble.