European banks need 2.5 bn euros as 8 fail health check

Eight European banks are not strong enough to withstand a prolonged recession and need to raise 2.5 billion euros in capital, an industry health check aimed at reviving investor confidence has shown.

The "stress test" of 90 banks in 21 countries showed five banks in Spain, two in Greece and one in Austria failed the test. The European Banking Authority (EBA), the regulator running the test, said full details on the banks that failed will be released later.

Between five and 15 smaller lenders had been expected to fail the test. All big banks passed, as expected. The International Monetary Fund has warned Europe it is taking too long to rebuild its banking system and the threat of the Greek debt crisis spreading to bigger countries such as Spain and Italy has further rattled investors.