SO MUCH FOR public banking being the solution to the financial mess in Spain:

Seven out of 91 European banks failed the region's long-awaited stress tests and may need to raise more than 3.5 billion euros ($4.5 billion) of additional capital, the Committee of European Banking Supervisors said Friday.

Five of the banks that failed were in Spain, with Germany's Hypo Real Estate and Greece's ATEBank also unable to maintain a Tier 1 capital ratio of more than 6% under the most severe scenario tested.

All the other German lenders including the troubled landesbanks passed the test, along with all of Europe's big listed banks.

It needs to be noted that the five Spanish banks who failed are all cajas (savings banks), which are owned and operated by local or regional governments.