After much speculation of an early release, an EU official confirmed earlier in the week that the EU bank stress tests results will be released after the European markets close today. The results will reveal how resilient the European banking sector is in the event of a sovereign shock or if economic conditions deteriorate; 91 banks will disclose their requirements for additional capital in order to boost their Tier 1 capital ratios to a required 6% level.

Many leading figures from member nations have been vocal in assuring the markets that their banks will pass the tests with flying colours. This has led analysts to question whether the tests have been thorough enough and if they will provide an accurate picture of each individual banks' exposure to troubled sovereigns.

In terms of market reaction, movement in the EUR will be the most prominent due to the fact that the European cash equity markets will have closed half an hour before the release. If the majority of banks pass, the EUR should rally, however given the recent EUR strength we could see a case of 'buy the rumour and sell the fact.' If the EUR does rally it is likely to be short lived and could well reverse course as analysts digest the results which may confirm their fears that the tests may not have been stringent enough. Equity index futures should also take a lift but will most likely see similar price action to that of the EUR with the major moves occurring on Monday morning when Europe opens for business. On the contrary, disappointing results will come as a shock due to the fact that the market has been prepped for relatively strong results.

Bayerische Landesbank, Commerzbank, Dekabank Deutsche Girozentrale, Deutsche Bank, Deutsche Postbank, DZ Bank, HSH Nordbank, Hypo Real Estate, Landesbank Baden-Wuerttemberg, Landesbank Berlin, Landesbank Hessen-Thueringen, Norddeutsche Landesbank, West LB, WGZ Bank

Comments: FAZ newspaper this morning said that all of the German Landesbanken have passed the tests. Financial sector sources have repeatedly said this week that Hypo Real Estate Bank will fail the tests. (19/07/2010)

Expectations: Apart from Hypo Real Estate, all of the German banks are expected to pass. If Hypo Real Estate fails, it is not a surprise. Hypo has been in trouble and had to be bailed out and taken over by the German regulators.

BPCE (Parent of Natixis), BNP Paribas, Credit Agricole, Societe Generale,

Comments: Bank of France governor Noyer said there is no reason to believe that French Banks would fail the tests. (06/07/2010) The same has been re-iterated by the French economics minister Lagarde on several occasions this week.

Expectations: All banks to pass.

Barclays, HSBC, Lloyds Banking Group, Royal Bank of Scotland

Comments: UK Chancellor Osborne said that the UK banks will not need any help from the Government, as they recapitalised after UK stress tests in 2008 and 2009.

Expectations: All banks to pass.

Banco Espirito Santo, Banco BPI, Caixa Geral de Depositos, Millennium BCP

Comments: Treasury Sector Pina said stress tests showed a solid and well managed Portuguese banking system without any capital problems.

Expectations: Both Banco BPI and Millennium BCP have failed stress tests performed by analysts at several investment banks so are expected to be the potential target of any failures.

Banca Monte dei Paschi, Banco Popolare, Intesa Sanpaolo, UBI Banca, Unicredit

Comments: Bank of Italy Governor Draghi said he was confident that stress tests would show the Italian banks have ‘adequate’ capital. (15/07/2010)

Expectations: All banks to pass.

Allied Irish Banks, Bank of Ireland

Comments: Irish Central Bank governor Honohan said that the domestic banking stress tests were more severe than the EU stress tests. (16/07/2010)

Expectations: Analysts have said that Allied Irish Bank may fail.

Agricultural Bank Of Greece S.A. (Atebank), Alpha Bank, Efg Eurobank Ergasias S.A., Piraeus Bank Group, National Bank Of Greece, TT Hellenic Postbank S.A.

Comments: Greek Central Bank Chief Provopoulos said that he expects Greek banks to ‘smoothly pass’ the stress tests (17/07/2010)

Expectations: All banks to pass.

BBVA, Banco March, Banco Guipuzcoano, Banco Pastor, Banco Popular, Banco Sabadell, Banco Santander, Bankinter and all the Cajas (Regional savings banks)

Comments: Spanish Finance Minister Salgado said all Spanish banks will pass the tests. (20/07/2010)

Expectations: Spanish newspaper El Pais ran a story this morning saying that several Spanish savings banks have failed the stress tests. Analysts are expecting the large listed banks to all pass, however some Cajas may fail, although the Bank of Spain’s EUR 99bln FROB (Fund for Orderly Bank Restructuring) will be able to help with any additional capital required.

Austria, Belgium, Netherlands, Poland, and Sweden

Slovenia’s PM said yesterday that the country’s biggest bank, the unlisted Nova Ljubljanska Banka, will fail the stress test. Nova is the only bank being tested within the country.

Cyprus, Denmark, Finland, Hungary, Luxembourg, and Malta

Swiss regulators will also be unveiling their results at the same time as the CEBS. According to the FT this morning the tests are twice as tough as the EU scenario and are expected to give both Credit Suisse and UBS a clean bill of health.