UK banks given seal of approval by financial regulator who blast key EU financial pillars

LEADING UK banks have been given a welcome boost by a European Union financial test while others key institutes in the eurozone have been savaged.

The Bank of England welcomed the results of the European Banking Authority’s (EBA) stress test which laid bare the full scale of Europe’s banking crisis. 

Barclays, HSBC Holdings, Lloyds Banking Group and The Royal Bank of Scotland Group are well equipped to deal with a European downturn, insisted the Bank of England. 

In a reassuring statement, the Bank of England said: “The results for the four banks are consistent with those of previous Bank of England stress tests. 

“They provide evidence that major UK banks have the resilience necessary to maintain lending to the real economy, even in a macroeconomic stress scenario.”

But under the stress test the RBS’s capital levels fell by 7.5 per cent meaning the bank may need to raise more money to reassure regulators. 

Two of Ireland’s main banks, Allied Irish and the Bank of Ireland, alongside Italy’s Monte dei Paschi and Austria’s Raiffeisen came out the worst in the stress test. 

The EBA test looked at how banks could withstand a three-year theoretical economic shock which ended with the Italian lender, the world's oldest have a core equity capital ratio of minus 2.44 percent.

This was the third stress test of banks in the EU since taxpayers had to bail out lenders in the 2007-09 financial crisis, with no pass or fail mark this time round.

Analysts have informally set a basic pass mark of 5.5 percent, the threshold set in last year's test.

Like Monte dei Paschi, Allied Irish Banks was also below this level at 4.31 percent.

Spain's Banco Popular, Bank of Ireland and Austria's Raiffeisen all ended the test below this level at 6.62 percent, 6.15 percent, and 6.12 percent, respectively.

EBA Chairman Andrea Enria said: "Whilst we recognise the extensive capital raising done so far, this is not a clean bill of health.

“There remains work to do."