Bank battle will now shift to market

It has been a fraught six months for Andrea Enria, chairman of the European Banking Authority. Ever since he started in the job at the beginning of the year, he has been battling with Europe's banks and many of the continent's national regulators to conduct a credible stress test. Now the fight will shift to the market, with analysts questioning whether identifying an aggregate capital shortfall of €2.5 billion (Dh12.9 billion) a 10th of some analyst estimates will be enough to convince investors that Europe's banks are safe bets again. Below we look at some of the key countries involved in the test. Spain Five of the nine European banks to fail the stress test are Spanish Banco Pastor, the listed Spanish domestic bank, and four small unlisted savings banks, CatalunyaCaixa, Unnim, Caja3, and CAM. The Bank of Spain said in response to the results that no Spanish bank would require a capital increase as a result of the test, potentially putting the regulator into conflict with the European authorities which are insisting on capital raising measures for any bank that falls below 5 per cent. Unlike several other EU member states, Spain had put up almost all of its financial sector for the tests, with 95 per cent tested against an European average of about 60 per cent. Greece Two Greek banks the state-owned ATEBank and EFG Eurobank, a private lender failed the stress tests based on end-2010 figures but have since raised their core tier one capital ratio well above the EBA benchmark. ATEBank had a core tier one ratio of minus 0.8 per cent at the end of last year, which has risen to 10.7 following a €1.2 billion capital injection ahead of its planned privatisation. EFG Eurobank, the country's second-largest lender, reported a core tier one capital ratio of 4.9 at the end of 2010, since raised to 7.6. Germany In Germany, where Jochen Sanio, head of BaFin, the bank regulator, had previously rounded on the EBA for not sticking to current definitions of core tier one capital, the 12 banks that remained in the test passed with average core tier one capital of 7.5 per cent. The lowest was that of HSH Nordbank, one of the group of public sector Landesbanken, which would have 5.5 per cent core tier one capital in the stressed scenario according to the tests. Helaba, another Landesbank, excluded itself from the tests this week rather than be judged to have failed after it did not get the EBA to agree to its plan to toughen up €1.9 billion of its hybrid capital. Austria Though Austria's two big banks Raiffeisen and Erste passed the tests relatively comfortably, with results of 7.8 and 8.1 per cent respectively, Volksbanken registered only 4.5 per cent. However, its sale of its international business to Russia's Sberbank should raise an estimated €600 million, compared with the €160 million capital shortfall in the test. Portugal Portugal's four largest banks met the EBA's required capital benchmarks for this year, but two lenders will have to raise more capital to meet the more exacting requirements for 2012. Italy Italy's top five banks passed the latest rounds of the stress tests. Officials said the results indicated Italian banks had resilience to withstand market and macroeconomic volatility even greater than that experienced during the Greek contagion fears that have buffeted Italy in the past week. Intesa Sanpaolo, Italy's largest retail bank, showed the strongest capital strength under the adverse scenario for 2012 with a core tier one capital of 8.9 per cent taking into account its recent €5 billion rights issue. Ireland The three Irish banks tested, Bank of Ireland, Allied Irish and Irish Life & Permanent, all passed, thanks to government bailout money, with ratios of 7.1, 10 and 20.4 per cent respectively. From / Gulf News