Seven of 91 European Union banks subject to stress tests failed with a combined capital shortfall of â?¬3.5bn.

Hypo Real Estate Holding AG, Agricultural Bank of Greece SA and five Spanish savings banks have insufficient reserves to maintain a Tier 1 capital ratio of at least 6 percent in the event of a recession and sovereign-debt crisis, lenders and regulators said today.

Spain, with 27 tested banks, makes up the biggest portion of the exams. The savings banks that failed were: CajaSur; a merger group led by Caixa Catalunya; a group led by Caixa Sabadell; Caja Duero-Caja Espana, and Banca Civica. Spainâ??s largest bank, Banco Santander SA, passed with a Tier 1 capital ratio of 10 percent under the most stringent scenario.