Markets won't punish Spain on Monday even though the majority of banks that failed Europe-wide stress tests were Spanish, the head of the European Banking Authority said in an interview. Spain submitted nearly all its banks to the tests, unlike other European countries, said EBA Chairman Andrea Enria in an interview with El Pais newspaper published on Sunday.
"It's a formidable exercise in transparency, which has not unveiled any great surprises and therefore I do not expect a black Monday. Absolutely not," said Enria. However, the five banks that failed the tests would need additional capital and a plan will be put in place to plug this gap, with measures discussed at a European level, he said.
The five banks that failed the tests account for less than 10 percent of the Spanish banking system. Four are unlisted regional savings banks and the other is small listed lender Banco Pastor.
The additional capital outlined by the EBA for the five banks to reach a 5 percent core Tier 1 capital benchmark is 1.6 billion euros ($2.26 billion), according to test releases. More than a quarter of the banks that took part in the tests were Spanish. Spain's two biggest banks, Santander and BBVA, emerged from the tests among the top 10 best capitalised banks in Europe. The five Spanish banks failed the tests because so-called generic provisions were not taken into account as capital. These provisions are a particularly Spanish measure and the regulator wanted to compare all banks on an equal footing.