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Several Spanish banks set to fail stress tests

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Several of Spain’s 18 savings banks have failed stress tests to see if they could handle worsening economic conditions, according to reports.

According to Spanish newspaper El Pais, some of the Spanish banks in question have recently been involved in mergers.

The test on 91 banks in 20 countries is set to be announced at 5pm today, with Spain, Germany and Greece all expected to be asked to raise the most fresh capital.

The head of the Association of German banks Manfred Weber has told a local radio station that he was confident that that German banks would perform well in the tests.

The test are expected to show that some of the unlisted savings banks will need a capital injection under certain scenarios, El Pais added citing financial sources, with a small number of savings banks needing more capital if conditions were to worsen sharply and there were sovereign debt crises in several countries.

According to a survey by Goldman Sachs, 10 of the 91 banks subjected to the stress tests are expected to fail.

The poll of 376 respondents, shows that European banks are expected on average to raise £40.6bn in extra capital following the tests.

Schroders European banks analyst Justin Bisseker says: “With the notable exception of Spain, where I believe the Central Bank is running the numbers – the European stress-test is more of a self-marked exam. In addition, 10 of the 19 banks stress-tested in the US failed and had to recapitalise. If recent leaks are to be believed the European ‘tickle stick’ will prompt capital raisings by fewer banks than you can count on the fingers of one hand.”

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