Six Spanish Banks expected to fail stress tests

 

The latest round of stress test of the Eurozone's banking industry will published later today, after analysing 90 banking institutions from 21 different countries.

Spain has submitted far more banks than any other for testing - 21 in total - in a bid to restore investor confidence in it's ailing economy, amid speculation the country itself may need an EU bailout.

6 of these 21 Spanish banks are expected to fail : 5 Cajas and a Medium sized Bank.

Spain's Banco Pastor and CatalunyaCaixa are both expected to be included on the list of failures under the EBA's criteria, which rules out the use of generic provisions as core capital. That could see more Spanish failures, as Spanish Banks hold a combined 27 billion euros in such provisions.

The EBA has state how this latest round of stress tests will me more thorough - this time 3,000 different points have been analysed compared to just 100 last year. The test has attracted criticism for not going far enough - just 7 Banks failed last year, requiring to raise just 3.5 Billion Euros in Capital, but just months later teh Irish economy needed bailing out.

This year's test requires banks hold more, better-quality capital, and need to raise capital if their core Tier 1 ratio falls below 5% of risk-weighted assets to be able to cope with a theoretical two-year recession.