May 12 (Bloomberg) -- European Union bank regulators will conduct confidential stress tests by September, stepping up scrutiny of risks after lenders absorbed more than $1 trillion of losses and writedowns in the global financial crisis.

Regulators in the 27 countries will privately report industry data to finance ministers and the EU’s executive agency, the Committee of European Banking Supervisors in London said. Results for individual lenders such as Commerzbank AG or Barclays Plc won’t be released.

The tests, the second devised by CEBS this year, seek to assess risks in the market, rather than determine capital needs, in contrast to the U.S. program completed last week. Still, authorities may order banks to top up capital as a result, adding to $412.5 billion raised by financial companies in the region during the crisis.

“They’ve got to be seen to be doing something to show they’re on the ball,” Dominic Bryant, an economist at BNP Paribas in London, said in a telephone interview. Any finding of a shortfall would “put pressure on banks to shore up their finances and be less risky in the future.”

Among EU banks, losses and writedowns from the crisis have hit hardest in Britain, led by HSBC Holdings Plc and Royal Bank of Scotland Group Plc, according to Bloomberg data. The $412.5 billion of capital raised by European banks in response to the turmoil includes Switzerland, not part of the 27-nation EU.

Trouble in Europe

After the crisis rippled through U.S. and U.K. banks, lenders in continental Europe, such as in Spain, are likely to lose money this year as their domestic economies contract, according to Bryant.

The program is “an assessment of the European financial system, to test its resilience to shocks and to contribute to best practices,” said Efstathia Bouli, a spokeswoman for CEBS, in a telephone interview. The twice yearly exercises are part of a “regular risk assessment” mandated by the EU’s executive arm, the European Commission.

“The stress tests are useful for giving confidence to the public,” said Leigh Goodwin, a bank analyst at Fox-Pitt Kelton Ltd. in London. “It needs to be done in a way that’s credible and transparent,” with the EU ensuring consistency among countries.

Calming Investors

U.S. regulators found that 10 financial companies led by Bank of America Corp. need to raise a total of $74.6 billion of capital, in results made public on May 8. Releasing the findings helped calm investors, U.S. Comptroller of the Currency John Dugan, who oversees national banks, said today at a conference in Washington.

Policy makers in Europe “need to subject financial institutions to rigorous stress tests,” Marek Belka, director of the International Monetary Fund’s European department, told journalists in Paris today. “Impaired assets need to be isolated from the rest of the financial sector.”

The CEBS designed a “common scenario,” which won’t be disclosed, to see how banks would perform in such an environment, according to Bouli. The regulators, who are members of CEBS, ran their last test in the first quarter of this year.

The German regulator BaFin and the Bundesbank, Germany’s central bank, will participate in this process to help complete the guidelines, BaFin spokesman Benjamin Fischer said.

Christian Noyer, governor of the Bank of France, told reporters April 26 that regular stress-testing has boosted the confidence of authorities about the ability of French lenders to weather the crisis.

To contact the reporter on this story: John Rega in Brussels at jrega@bloomberg.net.

Last Updated: May 12, 2009 12:25 EDT