Posts Tagged ‘european bank stress tests’

Twenty-Four European Banks Fail EBA Stress Test: Is a Major Banking Crisis Looming?

October 27th, 2014 Comments off

The European Banking Authority, in conjunction with the European Central Bank, conducted a stress test of 123 leading banks within the European Union. A total of 24 banks failed the stress tests, which gauges the ability of a bank located within the EU to withstand macroeconomic pressures, which are rapidly accumulating not only in Europe but throughout the global economy. This represents a full 20 percent of all the major banks subjected to the stress test by the EBA and ECB. (

Nine of the banks with failing grades are Italian; three are Greek and another three are Cypriote. Though only one of the banks  on the list of vulnerable banks is Irish (Ireland had previously been afflicted with a major banking crisis, requiring a massive bailout), that institution, Permanent TSB, is one of Ireland’s largest financial institutions. Permanent TSB was found to have a massive €854.8 million hole in its reserves. Overall, the EBA found that the banks surveyed in the stress test were short of 24.6 billion euros in capital reserves–the amount required in their modeling to withstand a three-year recession. This is the equivalent  of 31.17 billion U.S. dollars at current exchange levels.

Since the global economy imploded into systemic crisis in 2008, central banks and regulating authorities in major economies throughout North America and Europe have held periodic stress tests, apparently in an effort to reassure the public in those countries that their banks are in generally good financial condition. There is a suspicion among many that those stress tests are often rigged in a manner designed to present the most favorable indication possible regarding those banking institutions. The fact that this most recent stress tests undertaken by the EBA reveals that 20 percent of the European Union’s major banks are in trouble, and this at a time of economic stagnation throughout Europe, with increasing indications of looming recession, should serve as a warning klaxon on how fragile Europe’s financial health remains a full six years after the onset of the global economic and financial crisis.



If Hillary Clinton runs for President of the United States  in 2016, see the video about the book that warned back in 2008 what a second Clinton presidency would mean for the USA:



Hillary Clinton Nude

Hillary Clinton Nude


European Bank Stress Tests Are Tragic-Comedic Farce

July 25th, 2010 Comments off

When  the Obama Administration assumed office in early January 2009, the President’s chosen Secretary of the Treasury, Timothy Geithner, was already on record as estimating that the United States banking sector was in such dire straits resulting from the global financial and economic crisis triggered by the collapse of leading investment banks on Wall Street, it would require $2 trillion in government bailouts to repair the damage. However, once in power, President Obama and Secretary Geithner were reluctant to ask American taxpayers for another handout for Wall Street after the highly unpopular $700 billion TARP bailout. Their response was to rig a series of so-called banking stress tests,  which were completed in the spring of 2009. Only months after the near implosion of the global financial system, Geithner’s stress tests supposedly showed that the U.S. banks were in such excellent shape, only a handful required a measly $75 billion in recapitalization, a sum that could be easily raised through private investors. Never mind that Geithner’s stress tests  incorporated “worst case” unemployment rates that were already eclipsed by the summer of 2009 and other less-than-rigid assumptions. The market seemed to be charmed by Geithner’s charade, attested to by rising equity values of financial firms. Now the Europeans hope they can pull off the same performance.

With much fanfare, the Committee of European Banking Supervisors has announced the results of their own engineered bank stress tests, involving 91 banking institutions in 20 European countries. The architects of this banking Eurofest knew they could not show that all 91 had “passed” the stress tests, as this would simply not be credible even to the most gullible. For that reason, seven banks were selected as sacrificial lambs, and revealed as having failed the stress test, including five relatively minor Spanish banks, as well as the much larger state-owned German property and municipal funding specialist, Hypo Real Estate. This latter financial institution was so heavily weighted with toxic real estate assets, providing it with a passing grade would clearly have given the game away. However, despite the not unclever manipulation engaged in by the Committee of European Banking Supervisors, a growing number of observers and investors have begun to see through this farcical exercise.

Consider this; how valid can a stress test of European banks saturated with government bonds and other long-term public debt instruments really be if the supposed “worst case scenario” envisions no possibility of sovereign debt default in Europe? Only months after Greece was on the verge of public debt default without a massive Eurozone financial bailout, in turn funded by European countries that are themselves becoming increasingly mired in a profound sovereign debt crisis? Neither did the tests consider the possibility of a real estate or commodities crash, despite warnings that, among other dire possibilities, a global commercial real estate crash is increasingly likely.

The authors of this banking stress test would have one believe that not a single UK bank is in danger from worsening economic developments, despite a warning issued by analysts at the Royal Bank of Scotland to senior British policymakers in January 2009, entitled “Living on a Prayer,” which stated that almost the entire banking sector of the United Kingdom was “ technically insolvent.”

In February 2009, the European Union’s own executive branch, the European Commission, issued a confidential report, subsequently leaked to the British newspaper, The Daily Telegraph, which warned that European banks collectively held as much as 18.6 trillion euros in toxic assets. In the past 18 months we have witnessed a massive expansion of public debt  across Europe to fund economic stimulus programs, which has produced at best anaemic or stagnant growth figures, at the price of catastrophic levels of sovereign debt, prompting these same countries to now reverse fiscal policy and revert to budget trimming austerity measures. The likely outcome is clear; a double-dip recession in Europe, in conjunction with a lack of financial capacity by European taxpayers to again bail out their banking system to the same profligate degree that was undertaken after the collapse of Lehman Brothers.

As with Timothy Geithner, the architects of the European banking stress tests hope that  investors and the general public will believe their farce, based on totally unrealistic and overly-optimistic scenarios. In the case of Europe, the fervent desire is that the banks which are rightfully worried about counterparty risk will jettison their well-founded anxieties, and resume interbank-lending and credit flows at pre-crisis levels. However, as the American experience reveals, a banking stress test based on public relations requirements rather than realistic financial and economic modeling may boost the stock price of major banks, justifying  massive bonus payments to banking executives. However, as a solution for the continuing credit crunch and economic turmoil, it is no more than a tragic-comedic farce designed by committee.