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European banks fail EBA 8216 stress test 8217

Article By: ,  Financial Analyst
October 27, 2014 9:45 AM

A number of European banks have failed a "stress test" of their finances, according to the European Banking Authority (EBA).

The governing body stated that 24 of the 123 European Union banks had failed the stress test which aims to determine whether they are well equipped to withstand another financial crisis. The banks which failed have been given nine months to improve their finances or run the risk of being closed down.

Members of the EBA confirmed that no UK-based banks were among those which had failed. Among the failing financial institutes in the eurozone were four Italian banks, two Greek banks, two Belgian banks and two Slovenian banks. Italian bank Monte dei Paschi was noted to be the worst affected with a capital shortfall of €2.1 billion (£1.65 billion).

Of the 24 banks that failed the stress test, ten of them have taken measures to improve their balance sheets to meet the nine-month criteria.

In the UK, four banks were subjected to the EBA test with Royal Bank of Scotland, HSBC, Lloyds Banking Groups and Barclays all passing the test. Lloyds, however, only passed the assessment narrowly recording a capital of 6.2 per cent under the adverse scenarios, close to the 5.5 per cent benchmark.

A spokesperson for Lloyds said: "We welcome the EBA's confirmation that Lloyds Banking Group meets all the capital benchmarks set out for the purpose of the stress test, and that the group is not required to take any action as a result of the test."

Passing the EBA test will come as a boost for Lloyds which was hit by a major fine over the summer for its part in the libor rigging scandal. The banking group was found guilty of manipulating key interest rates and was charged with "serious misconduct" incurring a £218 million fine.

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