An EU watchdog has said it will carry out stress tests on 90 European banks and will apply tougher criteria in the wake of the losses which have emerged in Irish banks.
The tests are designed to reassure financial markets at a time when the euro zone is facing a fresh bout of turbulence, with Portugal seeking a multi-billion-euro bail-out.
Three Irish Banks are to be stress tested under the new round of European stress testing. Irish Life and Permanent will join AIB and Bank of Ireland on the list.
The latest round of stress tests are designed to be more credible than assessments done last year which were roundly criticised because they gave most banks - including those in Ireland - a clean bill of health.
Some of the banks passed in the last tests have since been swallowed up in mergers after they ran into trouble or have required emergency state support.
The European Banking Authority said today it would require banks to hold core capital equivalent to 5% of their risk-weighted assets in this year's round of stress tests. Such core capital has to be held in cash or instruments that can be easily changed into cash, making it easily available in times of need.
This core capital test is a tougher definition than the one used last year and excludes assets such as preference shares, but some analysts have again raised questions about this year's tests.
Spain has the most banks on the 90-strong list, with 24 to be tested, while 13 German institutions will be examined. Results of the latest tests are expected in June.
