Spanish Banks fail stress test

MADRID — Five Spanish banks have failed the European Union bank stress tests, making up the bulk of the eight failures in the bloc, the Bank of Spain said Friday.


But the five will not need additional capital because the sector is already being restructured, the governor of the Bank of Spain, Miguel Angel Fernandez Ordonez, told a news conference.

Four regional savings banks — Caja Mediterraneo (CAM), CatalunyaCaixa, Unnim and CajaTres — failed the tests, along with Banco Pastor.

Seven others only just achieved the bare minimum requirement of core tier one capital ratio of 5.0 percent.

These were Banco Sabadell, Banco Popular and Bankinter and the savings banks Novacaixagalicia, Caja Ontinyent, Banca Civica, Bankia. The last two are to be listed on the stock market on July 20 and 21.

“These results are those that were expected,” said Ordonez. “The most important thing is that none of them needs additional capital.”

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.

The London-based European Banking Authority (EBA) has carried out assessments on 91 banks representing 65 percent of the sector. A total of 25 of them were Spanish — the most of any country.

The EBA announced Friday that eight European banks had failed the tests and together need an injection of 2.5 billion euros ($3.5 billion) to meet new capital requirements.

The tests are intended to reveal which banks, if any, would not have strong enough balance sheets to withstand a big shock in the financial system, and will outline their levels of sovereign debt exposure.

The new tests are also designed to combat criticism over last year’s banking sector review which found that just seven out of the 91 European banks inspected were vulnerable to economic stress.

Of the 91 lenders examined in 2010, five in Spain, one in Germany and one in Greece failed to pass.

Three years on from the global financial crisis many developed nations are buckling under the weight of huge public spending and bank bailouts which were aimed at fixing the financial mess.

That has shifted the spotlight onto the eurozone’s most fiscally-challenged nations — Portugal, Ireland, Italy, Greece and Spain — and sparked genuine concern over the euro’s future