Despite €496 billion ($547 billion) of combined losses in the test, European banks “remain sufficiently capitalized to continue to support the economy also in times of severe stress,” the EBA said.

Most of Europe’s major banks saw a smaller erosion of their common equity tier 1 ratio than in the last exam. Deutsche Bank AG saw its hit narrow to 5.28 percentage points, from 6.2 percentage points, while the impact at BNP Paribas SA narrowed to 3.92 percentage points from 4.4 percentage points. ING Groep NV of the Netherlands faced a bigger erosion.

The European units of major US banks were included for the first time and faced bigger-than-average hits. 

Eoin Treacy's view

The ECB gives with one hand is taking with the other from the European banking sector. The majority of banks hope to be able to raise dividends following the successful stress test results.

At the same time, the ECB is no longer paying interest on the minimum reserves banks are required to hold. That’s a slug of capital banks will no longer receive interest on. It amounts to a loss of €200 million for Deutsche Bank alone and €6 billion for the wider sector.

The Euro STOXX Banks Index continues to rally towards the March peak. The Index has been ranging lower since 2008 but has held a sequence of higher reaction lows over the last three years. A break in that sequence will be required to question the medium-term demand dominated environment.