Q and A: What are the bank stress tests?

Q Why are banks being stress tested by the European authorities?

A In the crisis a lot of banks failed, in part because they did not have big enough capital buffers to absorb their losses. This test will see if they have increased those buffers enough.

Q Will it work?

A Tests have been done before, but the national authorities used different methods and made it easy for weak banks to pass the test. This is meant to be a more uniform.

Q What happens if a bank fails?

A Then they will be forced to raise more capital. If they cannot do that in the market, they may need help from governments – which will be expensive.