By Valentina Za and Balazs Koranyi MILAN (Reuters) -Banks across the European Union are strong enough to weather an economic shock driven by geopolitical and trade tensions, the European Banking Authority said on Friday as it presented the outcome of its latest health check of the sector.

European banks weathered a simulation of the potential impact of major international trade shocks, underscoring their ability to continue paying dividends and buying back shares.

European banks emerged from the latest EU-wide stress test in better shape than two years ago, with higher profitability and capital buffers equipping them to cope with heavy losses in the event of a sharp economic downturn.