EU banks to estimate capital needs in event of new slump

EUROPE’S banks have been asked to estimate how much additional capital they would need under two adverse scenarios as part of stress tests aimed at reviving confidence among investors.

Europe is testing how 91 banks, including Bank of Ireland and AIB, would cope with another economic slump and losses on government debt after the Greek crisis hit markets and raised fears the euro-zone could unravel.

With few details available about the terms of the test and early divisions among the 27 European Union members over how much information to divulge, investors have worried the assessments would not be tough or transparent enough. According to a document sent to banks and obtained by Reuters, banks must estimate how much more capital they might need to achieve a tier 1 capital ratio of 6% under three different scenarios.