European bank stress tests combine "very conservative" definitions of what counts as capital and "maximum disclosure" to let investors get a clear view of lenders' health

European bank stress tests combine "very conservative" definitions of what counts as capital and "maximum disclosure" to let investors get a clear view of lenders' health, the EU's top bank supervisor said.

Andrea Enria, chairman of the European Banking Authority (EBA), declined to give specifics before criteria of the new tests of around 90 banks emerge on Friday but told reporters he was confident the tests would be more convincing than last year's version.

Markets are keen to know how EBA has defined the capital used in its calculations of banks' Core Tier 1 ratios -- the most stringent indicator of how well they can absorb shocks -- and what pass mark to apply.

"We want to ensure consistency throughout Europe. It is difficult, but we think we have made a lot of progress on that, at least in the part of the instruments that is going into capital," he said late on Wednesday in remarks for release on Thursday.

"(It will be) a truly consistent definition of capital and very conservative," he said.

"It is a tough definition ... that eventually will not be far away from what will be Basel III (capital adequacy rules) in the first months of implementation in 2013. Actually, my perception is that it will be a bit tougher than that."

The stress test is already under way, and a senior regulatory source has said he expected the pass mark to be 5 percent of risk-weighted assets under the stressed scenario.

The European Union health check is aimed at drawing a line under the bloc's banking problems by giving markets enough information to force banks to recapitalise and allow markets to run their own tests in a bid to restore investor confidence.

"We will do the maximum disclosure. We will give all the positions book by book, trading book, available for sale, held to maturity, broken down by country of the counterpart, broken down by maturity -- which was not there last year -- so everybody will have all the information to assess the information in the way they like," Enria said.