Some EU banks may show 'vulnerability'

"I won't be prejudging the results, but in my view the European banking sector is overall resilient," Olli Rehn, the European commissioner for economic and monetary affairs, said at a news conference.

"But at the same time, when we publish the stress tests, we will have to prepare for any possible pockets of vulnerability. And for that (it) is essential that the national backstops will be in place -- which is the case. They are in place."

"Vulnerabilities" would be examined "case by case," he added.

The test results, to be released July 23, would indicate if 91 major European banks had enough capital to continue lending money if the economy slips back into recession or if a European state defaults on its debt and the banks post losses on the government debt they held.

A number of European nations -- notably Greece, Spain, Portugal and Iceland -- have had their credit ratings downgraded amid high debt and other financial problems brought on by the global credit crunch.

Greece's sovereign debt crisis spurred other EU countries to bail out the Hellenic republic and set up a $950 billion International Monetary Fund loan package to help other EU countries in need.

Fitch Ratings said Monday Spain's $125 billion bank-rescue fund should be "more than enough" to cover potential losses on its domestic loan portfolio.

And Portugal's good solvency ratios "confirm the solidity and robustness" of the country's financial system, Portugal's Finance Ministry told Dow Jones Newswires.

The cost of Iceland's financial collapse has not been determined, but exceeds 75 percent of the country's 2007 gross domestic product, analysts say.

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