European Union regulators are carrying out stress tests on 91 banks, accounting for 65% of the area's banking industry, to examine whether they can withstand a shrinking economy and a drop in government bond values.
The lenders being tested include 14 from Germany, six from Greece and four from the U.K., the Committee of European Banking Supervisors said in an e-mailed statement. EU banking regulators have told lenders that their planned stress tests may assume a loss of about 17% on Greek government debt and 3% on Spanish bonds, according to two people briefed on the talks.
Regulators are counting on the tests to reassure investors that banks have enough capital to withstand a debt default by a European country. The results will be disclosed "both on an aggregated and on a bank-by-bank basis, on July 23," CEBS said. The agency didn't specify scenarios for so-called haircuts on European sovereign bonds.