New EU bank stress tests set for February

(BRUSSELS) - New EU bank stress tests will be organised in February, with the 2011 series adding an examination of their liquidity positions, the EU's economic affairs commissioner Olli Rehn said Tuesday.

Rehn said "a new round of even more rigorous and even more comprehensive bank stress tests (was) ... due to start in February next year and will be based on the new financial architecture that will enter into force next January."

The Finnish official said Europe should "opt for the fullest possible transparency," adding that the EU would draw lessons from 2010, when Irish banks escaped the spotlight only to need a massive international bailout later.

"For instance, a liquidity assessment needs to be included in the future stress tests," he said.

The tests are designed to determine the financial capacity of banks to withstand economic crises of varying degrees of severity.

Of 91 European banks tested last July, only seven -- five in Spain, one in Germany and one in Greece -- were found to be vulnerable to economic stress.

Two troubled Irish banks, Allied Irish Banks and Bank of Ireland, passed the tests but they are now in the process of being nationalised as the state pours in ever more capital to keep them afloat.

Rehn said Anglo Irish Bank was already considered a bad bank, having been nationalised beforehand.