SPAIN:ALL EIGHT of the Spanish banks – Santander, BBVA, Sabadell, Bankinter, Pastor, Popular, March and Guipuzcoana – have passed the stress test imposed by the Committee of European banking Supervisors (CEBS). But five of the 19 cajas (savings banks) have failed the test.

As was expected, these are five of the most troubled Cajas de Ahorros, small unlisted regional savings banks usually patronised by locals and small businesses.

They are currently consolidating by merging with similar savings banks.

One of them, Cajasur in Andalucia, was taken over by the Bank of Spain earlier this year and will need an injection of €208 million to make it fit for a takeover by BBK.

The Bank of Spain says that it hopes to bring the number of cajas down from 45 to 22.

All five of the cajas which failed the stress test have needed, and some will continue to need, an estimated €2 billion in bailouts from Spain’s State Fund for Orderly Bank Restructuring (FROB). The fund was founded last year at the height of the financial crisis to prop up troubled banks.

Brussels yesterday gave the green light to Spain to extend FROB until December 31st.

Eight Spanish banks and 19 cajas – by far the largest number of any European country – were on the list of 91 European banks subjected to the stress test.

Miguel Angel Fernandez Ordoñez, governor of the Bank of Spain, said Spain had presented such a complete list of entities and their results in order “to remove any doubts” about which were the healthy ones and which less healthy.

Prime minister Jose Luis Rodriguez Zapatero said yesterday the 27 financial entities comprised 95 per cent of Spain’s financial organisations, compared to 50 per cent in the rest of Europe.

Mr Rodriguez Zapatero said Spain was making this “singular effort” to demonstrate transparency because he believed it was important for the economic recovery of the country.

Speaking in San Sebastian yesterday, Jose Manuel Gonzalez Paramo, a member of the executive committee of the European Central Bank, said he was confident the tests will be “very positive for the markets”.

But he admitted the tests were not perfect, being based on “a hypothetical situation that is highly improbable” because they were based on government debt figures in May, at the height of the financial crisis.