Bloomberg News

Speculation on Stress Test Results ‘Unfounded,’ EBA’s Enria Says

June 29, 2011

June 29 (Bloomberg) -- The head of the European Banking Authority said “speculation’’ that a certain number of banks would fail the upcoming stress tests is “completely unfounded.’’

The data for the tests, which may be released as soon as next month, is still being processed, Andrea Enria, the EBA chairman, said in a speech in London today. The EBA may fail as many as 15 banks to give the lender examinations more credibility, a person familiar with the negotiations told Bloomberg News.

Last year’s tests, which allowed national regulators to use their own capital definitions, were criticized by bank analysts for not being tough enough. Lenders in the 27-nation region were shown by regulators to need only 3.5 billion euros ($5.1 billion) of new capital, about a 10th of the lowest analyst estimate.

“The results have not yet been put together,” Enria said today. “They have not gone through the final round of quality assurance and peer review process.”

Ninety-one banks will be expected to maintain a Core Tier 1 capital ratio of at least 5 percent under the stress-test scenarios, the EBA said. That capital measure is stricter than last year’s assessment, which had a pass rate of 6 percent Tier 1 capital, a measure of financial strength that encompasses a broader range of securities.

Reuters reported the EBA may fail as many as 15 banks yesterday.

--Editors: Anthony Aarons

To contact the reporter on this story: Jim Brunsden in Brussels at jbrunsden@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net


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