Spanish banks in EBA Stress Test

A total of 8 out of the 91 European financial institutions that have been submitted to the European Banking Authority (EBA) stress tests have failed the tests because they have not been able to demonstrate that they can maintain a basic capital of 5% under adverse economic circumstances. Five of these banks are Spanish, two Greek and one Austrian. Out of the 25 Spanish entities that came under examination by the EBA five failed to pass the test set by the EBA. These are – Catalunyacaixa, Unnim, CAM, Caja3 and Banco Pastor. The other twenty Spanish financial institutions that were submitted to the stress test passed and in the case of Santander and BBVA they passed with flying colours. In fact, these two banks demonstrated that they had almost double the amount of minimum capital required to pass the stress test. This was also the case with Unicaja. The tests by the EBA looked at 91 European financial institutions, a quarter of which were Spanish representing 95% of the financial system in Spain.

Two types of results were recorded. On the one hand, homogeneous criteria were studied for all the banks in the test without considering the specific elements unique to each country to help their financial institutions face the current economic crisis. It was under these criteria that the five Spanish entities failed to pass. However, there is a second criteria which takes into account national solutions to the crisis. In the case of Spain these are the so called ‘generic provisions’ set down by the Bank of Spain. These ‘provisions’ are intended to act as a cushion which financial entities pay into during boom years in order to be able to get through adverse situations that may arise in the future. Under this criteria all the Spanish financial entities which have been scrutinised have passed the test which is why the Bank of Spain will not ask Catalunyacaixa, Unnim, CAM, Caja3 and Banco Pastor to increase their capital.