European Union banks face their toughest probe yet in a bid to weed out the sector’s weaklings, the bloc’s chief watchdog said yesterday, announcing stress tests intended to help draw a line under the financial crisis.

Santander plans to invest in Spain’s so-called “bad bank” in a sign that healthy domestic lenders are willing to support the entity created to clean up the aftermath of a 2008 property crash.

The agency Fitch has downgraded the credit rating for Spain's two biggest banks - Santander and BBVA - by two notches.

Moody’s Investors Service cut the long-term debt and deposit ratings of 16 Spanish banks yesterdays, including Banco Santander, the eurozone’s largest, saying the government’s ability to support some banks had weakened.

Banco Santander SA and Banco Bilbao Vizcaya Argentaria will set aside €4.5bn to meet a Spanish government order to boost real estate provisions as analysts speculate the industry may need more.

Hoping to put an end to a four-year banking crisis, the Spanish government effectively took over Bankia SA, one of the country’s biggest banks, after days of market anxiety over its viability.

World markets took political upheaval in Europe largely in their stride yesterday.

A private sector solution is not likely amid fear of bad loans and recession, writes Sinead Cruise

SPANISH police arrested three suspected members of the so-called “Anonymous” group yesterday on charges of cyber attacks against targets including Sony’s PlayStation store, governments, businesses and banks.

The economic recovery in Europe was dealt a blow tonight as a key credit agency downgraded its outlook for Spain, one of the continent’s major players.

Spanish bank Santander today looked set to be the only firm bidder in the auction of 318 branches being sold by Royal Bank of Scotland.

Spanish banking giant BBVA is considering a potential £2bn (€2.4bn) bid for the Clydesdale and Yorkshire banks, it was reported today.

The owner of the Clydesdale and Yorkshire banks has held talks with Spain’s BBVA about working together on a deal to buy the £1.5bn (€1.76bn) network of 318 branches being sold by Royal Bank of Scotland, it was reported today.

Significant increases in real estate investment turnover in the UK, Germany and Spain in the third quarter of 2009 propelled an upturn in the European commercial real estate investment market, according to the latest data from CB Richard Ellis Group.

British Airways today said it was no longer involved in plans for a takeover of Spain’s Iberia, the fourth-largest airline in Europe.

British Airways today said it would not exercise its right to take a greater slice of Spanish airline Iberia.

Royal Bank of Scotland was today reported to have made a £12bn (€17.6bn) offer for LaSalle, the US bank at the heart of the ABN Amro takeover saga.

Plans for an £89bn (€131bn) merger of British bank Barclays and ABN Amro came under more pressure today after the Dutch bank’s shares surged on hopes of a rival offer.

Banking giant Barclays was today facing a make-or-break 48 hours in its battle to complete a £89bn (€131bn) merger with Dutch banking group ABN Amro.

SHARES in ABN AMRO, the biggest bank in the Netherlands, hit a record high on Monday after what sources said was a merger approach by Barclays for Europe’s biggest financial services deal.

The London market was on the rise today after takeover interest in cigarette giant Gallaher lit up the tobacco sector.

The FTSE 100 Index overcame a tentative start to move back within touching distance of the 5800 barrier today.

A bomb exploded at a resort hotel in south-eastern Spain today, reports said. The building had been evacuated and no one was injured.

HOMEOWNERS could soon be able to fix their mortgages for 25 years, pay less and face no costly penalties for paying off their loans early.

Irish Life & Permanent has agreed to join a consortium of European banks to establish a new system that could offer cheaper mortgages.

THE ESB, prevented by the Government from making a major incursion into the Polish energy market, yesterday signed a €690 million deal to build and operate the first foreign-owned power plant in Spain.

CREDIT Suisse First Boston (CSFB) yesterday downgraded several top European banks on valuation grounds but maintained its overweight rating on the sector.

Share prices extended their losses in late afternoon trade, dragged down by Wall Street, while Union Fenosa and Sogecable underperformed on debt and liquidity concerns, dealers said.