LONDON, July 30 (Reuters) - European Union banks moved closer to being able to pay dividends again after an overall strong performance in stress tests by the region’s banking watchdog, published on Friday. The tests showed that EU banks took a 265 billion euro ($314.7 billion) hit in a test of their resilience to economic shocks, which still left them with two-thirds of their buffers intact, the European Banking Authority said. The results of the tests, which were delayed from last year due to COVID-19, are seen as critical to banks resuming dividend payouts, which were barred during the pandemic in order to conserve capital. “Since the start of COVID, there has been a problem of visibility of banks’ relative asset quality. This stress test will increase transparency across the industry,” said Javier Garcia, a partner at consultants Oliver Wyman. After an ECB ban on dividends last year, which is set to be lifted, some banks this week have already begun guiding shareholders on dividends, and Garcia said this could not have been done without the lenders having emerged unscathed from the stress test. The EBA tested the resilience of 50 top lenders to economic shocks. The banks account for 70% of EU banking assets. Under the harshest scenario spanning three years to 2023, which baked in a prolonged fallout from COVID, the aggregate core ratio of capital to risk-weighted assets fell by nearly 500 basis points, pushing the ratio down to 10.2% from 15%. More domestic focused banks suffered bigger hits to capital in the test compared with their cross-border peers. The overall result is seen by EU regulators as being in line with stress tests by the Federal Reserve and the Bank of England. Marco Troiano, an analyst at Scope credit rating agency, said the depletion of capital at each bank under the test’s harshest scenario will be closely scrutinised, and could potentially lead to hostile takeovers. EBA publishes bank-by-bank results of this year’s exercise at 1600 GMT. Last month, U.S. banks cleared a Federal Reserve stress test and will no longer face pandemic-era restrictions on payouts. Britain’s banks this week have also flagged dividends after their stress test results were announced earlier this month. Although there was no pass or fail mark in the EU test, the results will be used by the bank’s supervisor, which is the European Central Bank in the euro zone, to determine capital requirements. Separately, the ECB is testing the next tier of 51 banks it supervises with the results due at 1700 GMT. Stress tests, now held every two years in the EU, were introduced annually in the aftermath of the global financial crisis over a decade ago, which forced taxpayers to bail out undercapitalised banks. At the outset, pass or fail results were used to plug capital gaps, but as lenders became sufficiently capitalised, supervisors ditched the thresholds and have used the exercise to spot vulnerabilities and shape supervision. Friday’s test was the first that did not include UK lenders due to Britain leaving the EU last December. $1 = 0.8420 euros Reporting by Huw Jones. Editing by Jane Merriman Our Standards: The Thomson Reuters Trust Principles.