Sunday, July 25, 2010

For European banks – skepticism will continue

As expected, European banks published results of the banking stress test on Friday. Ninety-one banks were tested and seven failed.

MY TAKE: Prior to publishing the results, investors were skeptical of the testing process. Given that 1) only a small number of banks failed, 2) the tests identified a potential capital short fall of only 3.5 billion Euros, 3) some banks performed the tests on their own and 4) some banks did not release details of the impact of a potential sovereign debt default; investors will likely remain skeptical of this process.

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