ECB hails results of EU bank stress tests

The European Central Bank last Friday hailed the results of European Union stress tests on major commercial banks, saying the findings confirmed banks could survive severe shocks.

The ECB "welcomes the publication of the results" of tests on 91 banks, which "confirms the resilience of EU and euro area banking systems to major economic and financial shocks," a statement said.

Only seven banks, five in Spain and one each in Germany and Greece, failed the exam.

The London-based Committee of European Banking Supervisors (CEBS) released the results of tests conducted in close cooperation with national supervisory authorities and the ECB to reassure investors that European banks stood on firm financial footing.

The ECB said the test process "significantly enhances the transparency of the EU and euro area banking sectors" and stressed it was carried out after European banks had had a chance to raise new capital, which helped them pass.

The stress tests assumed two adverse scenarios, one involving a severe economic recession and another that added a major shock to interest rates along with heavy losses on loans and government bonds.

Economists had warned that if the tests were deemed too lenient it could increase tension on crucial interbank lending markets.

But ING analysts said following the release that the "CEBS appears to have delivered reasonably rigorous methodology in an attempt to instil confidence."

"What can be said is that today's stress test release does not appear to have uncovered any 'skeletons in the closet'," they added.

The British Bankers' Association said: "UK banks have already put in the work to rebuild their businesses and put more money aside against future financial problems. It is no surprise to find they have exceeded the standards set out by CEBS."