EU Says Most European Banks Can Resist Financial Shocks

The European Union (EU) has welcomed the publication of the results of the EU wide stress test on banks saying they represent another step in this process of repair.

“The repair of the EU banking sector is an important element of a comprehensive response to the current crisis,” said EU Commissioners for economic affairs Olli Rehn and for internal marker Michel Barnier in a joint statement Friday night. The European Banking Authority (EBA), which carried out the stress tests, published the results last night which showed that 8 out of 90 European banks failed the stress tests.

Another 16 European banks were in the danger zone. The stress tests are a kind of an examination to ensure whether the banks will withstand another financial crisis. Five Spanish, one Austrian and two and two Greek banks failed the tests.

“The results highlight that the great majority of European banks are now much stronger and better able to resist shocks,” noted the EU statement.

“For those banks that have not met the threshold, and for those that have but still demonstrate substantial weaknesses, we expect them to take all the necessary steps to reinforce their capital positions,” it sid.

Next week, the European Commission will make proposals to require banks to hold more capital, as well as introduce requirements for the first time relating to liquidity and excessive leverage, so that banks can better withstand financial shocks and longer-term funding stresses, it added.