Helaba ruled itself out of the stress test by not complying with capital standards set out in it, the European Banking Authority (EBA) said.

The EBA will now publish test results of 90 banks from 21 countries after European markets close on Friday, to try and restore confidence in a sector being battered as the euro zone debt crisis moves from Greece, Portugal and Ireland to Italy.

Investors have long asked for more information from Europe's banks and they will get it, including profit forecasts, transparency on sovereign bond holdings and funding costs that banks are being forced to reveal for the first time.

Banks have said too much transparency about the size of sovereign debt holdings and likely losses could unnerve markets if EU leaders fail to come up with a lasting solution to the euro zone's fiscal woes.

Helaba said yesterday it would only have passed the test if it could have included plans to improve the quality of its "silent participation" hybrid debt, but this was rejected by the EBA.

The EBA's test only allows banks to mitigate any shortfalls in capital with plans for raising pure equity or mandatory restructuring plans agreed between January and April.

"The stress tests will give a degree of disclosure that we haven't seen before, and it's no surprise that German banks are reportedly squealing about giving so much information in a transparent standardised format," said Tamara Burnell, head of sovereign and financials credit analyst at M&G Investments.

The EBA said its third pan-EU stress test of lenders since the financial crisis began will give more detail - 3,000 data points compared with 100 last year.

The test has been criticised as being too mild, but investors said a bigger problem is that banks remain in denial about the need to recapitalise.

"The 'extend and pretend' policies of banks globally has failed to give bank managers the incentive to raise enough capital," said Neil Dwane, chief investment officer for Europe at RCM, a unit of Allianz Global Investors.

After steep share price falls, the cost of raising equity has soared and the ability to raise debt has collapsed, he noted.

This year's test requires banks hold more, better-quality capital, and need to raise capital if their core Tier 1 ratio falls below 5 percent of risk-weighted assets to be able to cope with a theoretical two-year recession.

Ten to 15 banks are likely to fail the test, euro zone sources told Reuters two weeks ago, with casualties expected in Spain, Greece, Germany and Portugal.

Six Spanish banks will fail, including five savings banks and a mid-sized bank, according to a local report. Spain is testing 21 banks, far more than any other, and is trying to restore confidence in the industry.

Most expectations are now for between five and 15 banks to fail, according to analysts polled by Reuters and other surveys. No large bank is expected to fall short of the pass mark.

"The most likely result is a similar outcome to last year, with a handful of banks (10 or less) failing, and a capital raising requirement of around €10 billion," Matt Spick, analyst at Deutsche Bank, said in a note this week.

Nine banks will fail and need to raise about €29 billion, according to the average opinion in a poll last month by Goldman Sachs of 113 investors, including long-only investors and hedge funds.

Reuters