Banks ‘can survive deeper recession’

Brussels: A stress test of the EU’s biggest banks showed they could withstand an even deeper recession, though with almost €400 billion in losses, according to a report to EU finance chiefs.

Under EU forecasts for 2009 and 2010, the largest banks in the region would maintain an average Tier 1 capital ratio “well above” 9%, officials said. A “more adverse” scenario would boost losses and cut the average ratio to about 8%.

The five-month study was ordered by ministers after a similar one in the US. European Central Bank president Jean-Claude Trichet emphasised that the potential losses for the region’s 22 largest banks represents an “adverse” scenario and not a base-line case.