Eight banks have failed EU banking stress tests, the results of which have been released.
The European Banking Authority published today the results of its 2011 EU-wide stress tests of 90 banks in 21 countries.
Five Spanish banks, two Greek and one Austrian bank failed.
But the five Spanish banks will not need additional capital because the sector is already being restructured, the governor of the Bank of Spain, Miguel Angel Fernandez Ordonez, told a news conference.
The five are: four regional savings banks - Caja Mediterraneo (CAM), CatalunyaCaixa, Unnim and CajaTres - along with Banco Pastor.
Seven others only just achieved the bare minimum requirement of core tier one capital ratio of 5.0%.
These were Banco Sabadell, Banco Popular and Bankinter and the savings banks Novacaixagalicia, Caja Ontinyent, Banca Civica, Bankia.
The last two are to be listed on the stock market on 20 and 21 July.
Greek banks EFG Eurobank and ATEBank failed, the Bank of Greece said.
Eurobank had a core Tier One capital ratio of 4.9%, while ATEBank flunked with minus 0.8%, the central bank said.
Austria's Volksbank failed the EU bank stress tests, the Austrian regulator FMA said.
At the end of 2010, 20 banks fell below the 5% Core Tier 1 Ratio threshold over the two-year horizon of the exercise.
However, the EBA allowed specific capital increases in the first four months of 2011 to be considered in the results. Banks were therefore incentivised to strengthen their capital positions ahead of the stress test.
When this capital-raising was taken into account eight banks were found to fall below the 5% threshold.
In addition a further 16 banks display capital of between 5% and 6%.
In a statement the Central Bank of Ireland said the Irish banks which were tested, Bank of Ireland, AIB and Irish Life and Permanent, had met the requirements.
This followed stress tests in March which required a further €24 billion of capital to be injected into Irish lenders.
Bank of Ireland's stressed core tier one capital ratio of 7.1%, the tests found. AIB's ratio was 10.0%. IL&P's was 20%.
Minister for Finance Michael Noonan said that was pleased that the three Irish banks had passed as result of actions undertaken following the Government's banking announcement on 31 March.
'It is important to note that the result of the EBA stress test for the three Irish institutions confirms the findings of the PCAR test (the Central Bank's Prudential Capital Assessment Review) and no additional capital requirement has been identified from the outcome of the exercise,' Mr Nonan said.
'The institutions will continue with the deleveraging and restructuring work which was set out in my March banking statement.'
EU commissioners Michel Barnier and Olli Rehn issued a joint statement in which they welcome the stress test results.
'The repair of the EU banking sector is an important element of a comprehensive response to the current crisis,' they said.
The EBA also issued its first formal recommendation stating that national supervisory authorities should require banks whose CT1R falls below the 5% threshold to promptly remedy their capital shortfall.
The four main Portuguese banks passed EU stress tests, the Bank of Portugal said.
But the central bank said that the two biggest private banks in the country, BCP and BES banks, had to 'raise capital or sell assets' within three months.
The EBA wanted each bank to have liquid reserves- which serve as an essential buffer against unforeseen financial shocks - totalling 5% of the lender's loans, bonds and securities.
The tests were intended to reveal which banks would not have strong enough balance sheets to withstand a big shock in the financial system, and will outline their levels of sovereign debt exposure.
Tests carried out last year were judged a failure after only seven lenders failed. No Irish bank failed, even though months later they had to be rescued and a bail-out from the EU and International Monetary Fund followed.
This year the tests were stronger. The head of the EBA, the regulator overseeing this years stress tests, says the results will provide 'unprecedented' new insight about the industry, and that this will be useful in a time of turmoil for the EU.
But many argue that the tests go too far. Germany's banking regulator, Bafin, says the EBA's methods are not legitimate. The results will come out this afternoon, when stock markets close.
While the EBA tests cover three Irish banks - Bank of Ireland, AIB and Irish Life & Permanent - the results of their tests have been known since March, and were used to calculate their recapitalisation.
European Commission approves recapitalisation
Meanwhile, the European Commission has granted temporary approval for the recapitalisation of AIB/EBS.
The recapitalisation is worth up to €13.1 billion.
In a statement, the Commission said that it found the measure to be necessary to increase the bank's solvency ratios, to enable it to resist stress situations, and to preserve stability on the Irish financial markets.
The Commission will take a final decision on aid to AIB/EBS based on the new restructuring plan that Ireland committed to submit in due course to take account of this additional state support.
The restructuring plan is due by the end of July.
