By Giovanni Legorano
ROME--Nine Italian banks failed European regulators'
financial-health checks, the biggest concentration of troubled
banks in the European Central Bank's stress tests.
A total of 25 eurozone banks flunked the tests, facing a
cumulative capital shortfall of EUR24.6 billion ($31.17 billion).
Other countries with multiple failures include Greece and
Cyprus.
In Italy, the nine banks came up nearly EUR10 billion short on
capital in the tests. However, five of the nine failed banks
already have managed to fill their capital holes. The other four
banks have two weeks to present plans to regulators explaining how
they intend to close the capital gaps.
Banca Monte dei Paschi di Siena SpA, Banca Carige SpA, Banca
Popolare di Milano SCARL and Banca Popolare di Vicenza ScpA face a
collective capital shortfall of EUR3.3 billion, according to the
Bank of Italy.
The five banks that failed the tests but subsequently came up
with additional capital are Banco Popolare SC, Banca Popolare
dell'Emilia Romagna SC, Banca Popolare di Sondrio SCpA, Veneto
Banca SCpA and Credito Valtellinese SC.
The Bank of Italy, which has been on the defensive for years
about the adequacy of the supervision of its banks, argued that the
capital shortfall is smaller than it seems. Taking into account
capital-generating measures such as asset sales and accounting
adjustments, the banks' outstanding capital shortfall shrinks to
EUR2.9 billion. Banca Carige, for example, is selling two insurance
businesses to help close its EUR814 million gap.
"The results confirm the solidity of the Italian banking system,
despite repeated shocks suffered by the Italian economy in the last
six years," the Bank of Italy said in a statement.
The biggest problem area is Monte dei Paschi, which is Italy's
third-largest lender. It needs to come up with EUR2.11 billion in
capital, which includes funds to pay back part of a government
loan.
Italy's two largest banks, UniCredit SpA and Intesa Sanpaolo
Spa, both passed the tests.
Write to Giovanni Legorano at giovanni.legorano@wsj.com
