Spanish banks prominent in European stress tests

Over a quarter of the 90 European banks that will be submitted to stress tests under the auspices of the European Bank Authority (EBA) are Spanish, according to a list released Friday by the EBA.

The EBA has toughened the terms of the test after Irish banks last year passed a similar probe only to require bailouts.

Banks need to maintain their core Tier 1 capital above 5 percent under a series of distressed scenarios.

The EBA has tightened the definition of core capital to include only equity, reserves and direct stakes held by governments. That excludes hybrid types of non-voting stakes that could cause problems for some German banks.

Twenty four Spanish banks will be tested including the main commercial banks Banco Santander, BBVA, Banco Popular, Banco Sabadell and Bankinter as well as virtually all the savings banks. Only four banks will be tested in France and Britain, five in Italy and 13 in Germany. The results are due to be released in June.

Five Spanish savings banks failed similar stress tests carried out last year. However, since then the process of consolidation in the sector has advanced, with a number of lenders tapping a state fund to boost capital.

The government has also increased the minimum core capital of commercial banks to 8 percent from 6 percent, and in the case of unlisted savings banks to 10 percent.