Five Spanish savings banks fail tests

(MADRID) - Five regional Spanish savings banks, of 19 analysed, failed stress tests to see how they would cope with worsened economic conditions, the Spanish Confederation of Savings Banks said on Friday.

But all eight Spanish banks, including Santander, the country's biggest bank, passed the tests carried out on a total of 91 financial institutions across the country, it said in a report.

The five regional savings banks which failed the stress tests -- Banca Civica, Diada, Espiga, Unnim and Cajasur -- were all involved in the recent wave of consolidation in the sector which was encouraged by the government and the Bank of Spain.

The Spanish government says 95 percent of the government's financial system underwent stress tests, compared to just 50 percent in other European nations.

Spanish banks got off relatively lightly in the global credit crunch in 2008 as the country's strict rules meant they did not invest heavily in the high-risk US home loans that hurt financial institutions elsewhere.

But many regional savings banks have been heavily exposed to bad debt since the collapse of the property sector at the end of 2008.

The regional savings banks, many of which are owned by regional politicians, account for about half of all lending in Spain.

Stress tests examine a bank's combat readiness

2010 EU-wide stress testing exercise - 
Committee of European Banking Supervisors (CEBS)