8 Banks in Europe Fail Stress Tests

Another 16 just barely passed
By Newser Editors and Wire Services
Posted Jul 15, 2011 12:04 PM CDT
8 Banks in Europe Fail Stress Tests
In this 2009 file photo, the sun is reflected on the facade of the European Central Bank Tower, seen through the euro symbol, in Frankfurt, Germany.   (Daniel Roland)

(Newser) – Eight of 90 banks have flunked stress tests that project how they would fare in another recession, and 16 more barely passed, Europe's banking regulator said today. The failing banks should "promptly" take steps to strengthen their financial cushions against losses, the European Banking Authority said as it released the results. The failing banks were in total $3.5 billion short of the capital they needed to pass. Two were from Greece, five from Spain, and one from Austria.

The banks that barely passed may also face pressure to strengthen their finances along with the ones that failed. The tests are a key element in fighting Europe's debt crisis. Officials want to identify weak banks and make them strengthen their finances so they could survive a possible default on government bonds by Greece or another heavily indebted country. One problem: The EBA doesn't have the authority to force action. Only the banks' national governments can do that. (Read more Europe stories.)

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