EU to start 2016 stress tests of banks on Feb. 24

(Adds background)

By Huw Jones

LONDON, Feb 23 (Reuters) - Top European banks will face the latest check on their finances this week as regulators run stress tests on the sector in an effort to ensure its resilience to possible economic and other threats.

The European Banking Authority (EBA) said in a statement on its website on Tuesday it will start the test at 1700 GMT on Wednesday, Feb. 24 and will publish the economic scenarios it will be based on, such as a sharp recession, at the same time.

The planned checks, which aim to help supervisors evaluate the profitability and sustainability of banks' business models, come just after the latest bout of turbulence, with banking stocks pounded by market worries about the impact of slowing global growth and low interest rates.

Since the 2007-09 financial crisis that forced taxpayers to shore up many lenders across the EU, regulators have held stress tests nearly every year. Banks had been given a 12-month break from the time-consuming stress tests, which from 2016 will be held every second year.

No test was held in 2015 after an intensive exercise that also included a review of assets on banks' balance sheets in 2014 ahead of the European Central Bank becoming the supervisor for the euro zone's top lenders in November that year.

Italy's Monte dei Paschi (Milan: BMPS.MI - news) had the biggest capital hole to fill in the 2014 test.

The EBA did not say when the results of this year's test will be published, but they are not expected to include a pass/fail minimum capital hurdle.

The initial aim of the test was to plug capital gaps, but in future the checks will become a tool for supervisors to make sure banks have a sustainable business model.

Past tests had been criticised for being too lenient, with Irish lenders, for example, being given a clean bill of health just months before the country almost went bust due to their difficulties.

Regulators said last year that in the 2016 test, 53 lenders would be checked, fewer than in previous tests, with 39 in the euro zone. Unpaid or so-called non-performing loans remain a problem for Europe's lenders in countries such as Italy.

EBA executive director Adam Farkas said in November this year's exercise will test for the first time some banks' foreign exchange exposure to adverse currency movements.

Daniele Nouy, who heads the ECB's supervisory arm, said in November she wanted risks from misconduct to be part of the stress test.

Top banks have been fined billions of pounds for trying to rig benchmark interest rates and currency markets. (Editing by David Clarke and David Holmes)