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EU's stress test on the banking system Nordea, SEB, Svenska Handelsbanken and Swedbank – the four major Swedish banks – got thumbs up in EU's recent stress test on the banking system.

The exercise was carried out by The Committee of European Banking Supervisors in coordination with 20 national supervisory authorities and included a sample of 91 European banks, representing 65% of the European market in terms of total assets. The stress test was conducted over a 2 years horizon, until the end of 2011, under severe assumptions. It focused mainly on credit and market risks, including the exposures to European sovereign debt.

The overall objective of the 2010 exercise is to provide policy information for assessing the resilience of the EU banking system to possible adverse economic developments and to asses the ability of banks in the exercise to absorb possible shocks on credit and market risks, including sovereign risks.

- It is very satisfying to see how well the Swedish banks perform in this stress test. The results confirm the positive outcome of previous Swedish stress tests made by the financial supervisory authority and the central bank, said Mats Odell, Sweden's Minister for Financial Markets.

- It is pleasing that we have been able to convey the traditional Swedish policy of openness and transparency. The publication of the stress test results, also for individual banks, is very important in order to restore confidence in the European banking system, commented Anders Borg, Sweden's Minister for Finance.

The stress test is based on three scenarios including parameters like weak growth, falling stock exchanges, higher interest rates and substantial losses for the banks.

- The stress test says that the European banks can handle losses amounting to more than EUR 560 billion, said Robert Bergqvist, Chief economist at SEB. It is important to perform this kind of tests as it trigs increased alertness and attention for what's going on at the financial markets, both nationally and internationally.