EU banks to face stress test in May

(LONDON) - Stress tests meant as the starting point for EU banking union will begin in May with the results due in October, the European Banking Authority said on Friday.

Set in conjunction with a separate review by the European Central Bank, the EBA stress test will involve 124 banks in 22 European Union countries, or about 50 percent of the bloc's lending sector.

The tests are intended to measure a bank's defences to shocks similar to the financial crisis that followed the collapse of Lehman Brothers in 2008.

But there have been concerns that the tests could turn up surprises and spark a new crisis in the eurozone.

During the test, the banks will have to show their holdings of super safe capital will not fall below 5.5 percent in the heat of a crisis. During stable periods, the asset threshold should remain above 8.0 percent.

The ECB meanwhile will carry out its own asset review of the eurozone's top 130 banks before it takes over as regulator at the end of this year as part of the new banking union.

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