10:14 AM
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The official test were
criticised as it did not build in the impact of a sovereign Greekdefault
Eight European banks have failed a test of their ability to withstand
a long recession and will have to raise 2.5 bn euros ($3.5 bn) of
capital, significantly less than expected. The European Banking
Authority said five banks in Spain, two in Greece and one in
Austria flunked the stress test. A further 16(Just pass) banks were also
deemed to be in a potential danger zone as they only just passed
the tests. However, the tests failed to consider what may happen
to banks if a major European country such as Greece, defaulted
on its debt. The banks which have failed will now be required to
raise more capital and pressure is likely to be exerted on those 16
banks whose core tier one capital ratio was between 5% and 6%.