By Eva Taylor and Huw Jones
FRANKFURT/LONDON (Reuters) - The results of Europe's most comprehensive review of banks' health will be released on Oct. 26, the European Central Bank and the European Banking Authority said on Friday, which will give the clearest picture yet of the state of the sector.
The ECB hopes the tests will banish fears about the health of European banks, which were pummelled during the financial crisis, and restore investor trust and revive lending to euro zone households and companies - a key to getting economic recovery back on track.
While the ECB is putting the euro zone's 130 largest banks through a backward-looking asset quality review and forward-looking stress test, the EBA will also run stress tests on banks in Britain and some other non-euro countries.
British banks face an additional test to their resilience to withstand a sharp drop in housing prices and the Bank of England said the result of this additional test will be published on Dec. 16.
Reuters already reported in September, citing sources at the time, that the results will be released on Sunday, Oct. 26.
The ECB has said lenders will have six months to cover any capital shortfalls reported in its asset quality review or the baseline stress test scenario, and nine months to cover any capital shortfalls from the adverse stress test scenario.
"Following the publication of the results, banks will, where necessary, have two weeks to submit capital plans to the ECB, detailing how shortfalls will be covered," the ECB said on Friday.
It has imposed the rigorous tests to wipe the slate clean before it takes over as the bloc's banking supervisor in November - part of a broader push for European integration to avert future crises.
The stress tests aim to gauge how banks would hold up under certain shock scenarios, while an asset quality review, which only the euro zone banks have to go through, looks at how certain assets are valued and whether lenders have set aside sufficient capital.
The composition of banks under review has slightly changed since the ECB's comprehensive assessment started about a year ago.
The latest changes mean that Portugal's Novo Banco, created from the bailout of Banco Espirito Santo (LS:BES), will not be part of the assessment, the ECB said on Friday, citing timing issues.
The EBA also said that the stress test on Novo Banco had been postponed.
The results for German mortgage bank Wüstenrot & Württembergische AG will be posted separately from the two banking entities of the group, Wüstenrot Bank AG Pfandbriefbank and Wüstenrot Bausparkasse AG.
And, after the acquisition of Spain's Banco Ceiss by Unicaja, the stress test is being conducted on the merged bank.
(Editing by Susan Fenton)