FRANKFURT, Germany — Eight of 90 European banks flunked stress tests projecting how they would fare in another recession, and 16 more barely passed — but analysts doubted Friday’s results would succeed in restoring confidence in the continent’s shaky financial sector.
Some countries challenged the results as inaccurate and overly pessimistic, saying they would not force weaker banks to raise new cash. Economists warned that the tests were insufficient because they did not simulate the main risk hanging over Europe, a default by Greece.
While markets were sanguine about the results — the euro barely moved — experts questioned whether the tests achieved their goal: restoring confidence in a sector that is carrying billions of bad debt from crisis-hit countries like Greece, Ireland and Portugal.
“The publication of these results will not assuage investors’ fears over the resilience of the EU banking sector,” said Marie Diron, senior economic adviser for Ernst & Young.
She said the tests were useful to single out particularly weak banks, but noted that a national debt default was “the single greatest risk facing the European banking sector at present.” As it presented the results, the European Banking Authority said the failing banks should quickly raise a total of $3.5 billion to boost their capital cushions. The banks that barely passed were also asked to shore up their finances in coming months.
Spain, commonly seen as the next-weakest link in the 17-country eurozone, fared by far the worst in the tests. Five banks failed the test outright, while seven others barely scraped by. However, the number of banks that Spain tested was far higher than in all other countries.
