Seven fail Euro stress tests

Five Spanish savings banks, one bank in Germany and one in Greece failed the stress tests on 91 banks coordinated by the Committee of European Banking Supervisors and published overnight.

The five banks in Spain are all cajas, similar to building societies, and part of a group of banks already known to be operating on thin levels of capital. The five are Unnim, Diada, Espiga, Banca Civica, and Cajasur. This group needs a combined €1.8 billion to meet the six per cent minimum capital ratio, taking into account the adverse economic shocks modelled in the test.

Only four actually need to look for fresh capital as the fifth, Cajasur, has already been seized by regulators and sold.

One of the other four, Banca Civica, overnight announced a €450m convertible bond placement with private equity firm JC Flowers.

Hypo Real Estate in Germany will need an additional €1.2 billion in capital. ATEBank (the Agricultural Bank of Greece) will need an additional €240 billion in capital.

All failed to demonstrate they held sufficient capital to maintain a tier one capital ratio of six per cent in a scenario of an adverse macroeconomic shock accompanied by selective default on sovereign debt. For more on the approach to testing, see one of the following articles.