Almost a third of banks could fail EU stress tests

MORE than a quarter  of the European Union’s major banks are set to fail the region’s stress tests, which are expected to be released next week, Moody’s said yesterday.

The agency said 26 out of 91 banks being tested are likely to need extra government assistance. Banks are anxiously awaiting the results of the tests, which are the first major task carried out by the new pan-European Banking Authority (EBA).

Last week, the EBA’s chief Andrea Enria revealed that the authority had forced banks to resubmit some of their results after determining that they had not been sufficiently pessimistic about possible haircuts on sovereign Eurozone debt. The EBA is staking its credibility on the tests.

But Moody’s says that its assumptions are still not dire enough because the tests “do not assume a sovereign default at a time when the risk of a sovereign default within the euro area has increased”.