Brussels, 29/08/2011 (Agence Europe) - On Monday 29 August, the European Commission said that the 2011 bank stress tests had shown that European banks were in a much better shape this year than last. A spokesperson for EU Economic and Monetary Affairs Commissioner Olli Rehn said that European banks had considerably more capital now than a year ago, which had been shown by the third series of stress tests (carried out by the European Banking Authority in July this year). At a conference at Jackson Hole in the United States at the weekend, attended by the central bankers of the world's leading economies, IMF Director General, Christine Lagarde said that European banks urgently needed to increase their capital in order to get rid of the danger of the sovereign debt crisis spreading over into the banking industry.
In the view of Rehn's spokesman, “the picture is clear”: the banks identified have begun a “process of consolidation” by raising capital on the markets over a six- to nine-month period initially, with, if necessary, the possibility of calling for public aid. The stress tests were “by far the most rigorous” ever carried out since 2009 on over 90 banks which account for more than 60% of Europe's bank assets, he said, persuaded that Lagarde's comments do not call on Europe to do more than has been planned. To pass the tests, European banks have to retain a cushion (core “Tier 1” capital) of more than 5% of their assets to prove they can withstand adverse conditions over a two-year period. Eight banks failed, revealing a combined shortfall of €2.5 billion, and 16 others just scraped through (see EUROPE 10421). While revealing exposure of banks to eurozone countries' debt, the stress tests did not include the scenario of default by a member state. (M.B./transl.fl/rt)