Spain 'hopes bank tests will quash bailout rumours'

A government source told newspaper El Pais that Spanish banks performed well in the tests of their ability to withstand liquidity problems.

"If the results of the tests were known there would be more than one surprise," one said.

The Bank of Spain, which has carried out stress tests on the country's listed banks and on weaker unlisted savings banks, declined to comment. It is due to publish its annual report tomorrow. The government was not available to comment on the report.

Many EU governments are reluctant to publish individual bank results, although US Treasury Secretary Timothy Geithner has argued for as much transparency as possible on banks' abilities to resist problems.

"We find transparency of stress tests positive but at the moment are not considering it for individual banks but rather for the sector overall," said Austria's finance minister Josef Proell this month.

Yesterday Spain was forced to deny reports in a German newspaper that the country could seek aid from the 750 billion European Financial Stability Facility as early as this week.

Investor nerves were reflected in higher yields in Spain's auction of Treasury bills today, with the rate on 18-month bills rising almost 90 basis points from the previous sale to 2.837%.

Treasury secretary Carlos Ocana and the chairman of Spain's second largest bank BBVA said yesterday that the crisis in confidence was taking a toll on Spain's banks, with foreign banks refusing to lend to some.