The Committee of European Banking Supervisors has released the results of stress tests on 91 European lenders.
Just seven of them failed and the European Commission and the European Central Bank said that confirms the overall resilience of the region’s banking system.
Of those seven, one was German, one Greek and five were Spanish, but the governor of the Bank of Spain pointed out the tests were based on a “highly unlikely” scenario of economic deterioration.
He said the results show that under “normal and predictable” conditions the Spanish financial system is “solid”.
European Central Bank Vice President Vitor Constancio rejected suggestions the tests had not been stringent enough.
He said: “I think these stress tests are the most extensive and the most severe that have been conducted in developed countries on such a scale.”
All of France’s banks passed and the French Finance minister Christine Lagarde strongly defended the integrity of the test.
She said: “In my view, the test was tough, it was inclusive, it was very comprehensive, it included macroeconomic components, as well as debt crisis components, and as a result I would suggest that those results should be very credible and should certainly raise the confidence in European banks.”
The main market reaction will come on Monday when the banks will learn whether this exercise has made it easier or harder for them to borrow.