Instant view: Eight banks fail European stress tests

Reuters

LONDON (Reuters) - Eight European banks are not strong enough to withstand a prolonged recession and need to raise 2.5 billion euros in capital, an industry health check aimed at reviving investor confidence showed on Friday.

The European Banking Authority said 16 other banks had core capital of between 5 and 6 percent and will have to take action to improve capital buffers.

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COMMENTS:

FREDRIK NERBRAND, GLOBAL HEAD OF ASSET ALLOCATION, HSBC BANK, LONDON

"On a top-line basis it was pretty much in line with expectations. Having said that, the expectations weren't set very high, given the fact that the stress scenario isn't adverse enough to make the stress test really worthwhile. It wasn't going to show that very many people had failed."

EARLIER COMMENTS MICHAEL SYMONDS, CREDIT ANALYST, DAIWA CAPITAL MARKETS, LONDON

"With only eight banks failing and the requirement for these banks to raise 2.5 billion in capital, it wasn't the solution to restore confidence. What was needed was for more banks to fail and for more capital to ultimately be raised."

"That being said, I don't think people really expected that outcome. But the solution to the wider sovereign/bank malaise in Europe needs to go beyond simply pumping more capital into the continent's banks. That's the underlying message, the solution's gone beyond that."

(Reporting by Simon Jessop in London)