ΒιΆΉΤΌΕΔ

Have you also learned Robert that only the trading book element of the sovereign debt has been surveyed? This means that 70+% of the liability has not been included.
American sources are already describing the omission as 'laughable'.

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ooooooh what a surprise!

Oh well, lets just see what happens when a model test of banks strength is "stressed" in a real life senario.

Not too long now. Greece is on a slippery slope that will drag Spain, Portugal, Ireland and even Italy..... lets call it it the Euroland in to default on default

Oh did they stress test for that? how unfortunate

Robert wrote:

"Regulators will claim that the European Union's financial institutions are in better shape than many investors and creditors believe."

Hmm... much as expected. This will make no difference to the speculators.

Frankly this is only about 4 UK banks - it tells us nothing about the rest. This is particularly important given the absurd way that the FSCS guarantees deposits. The 4 UK majors only provide a safe home for 200K (actually it is a bit more, as Lloyds Group still has 3 separate registrations so actually 300K) but anything over this is at greater risk (as the stress tests of the other deposit takers have not been published.) But perversely these are deemed to be safe up to 50K, just the same as the Banks that have passed the test. These other banks must for their own, and the country's, benefit submit themselves and publish the results of the same stress test.

(Oh, and by the way the limit is probably going up to 85K at the end of the year (100,000 Euro) Europe wide)

But the argument is just the same - all UK deposit takers MUST immediately publish the results of the same stress test.

Peston, I think you are aware that the EU Stress Tests (akin to the USA's 2009 'Supervisory Capital Assessment Program') serve one purpose and one purpose alone - increasing the public, private sector finance and sovereign states' confidence in the EU banking sector.

Did you for one minute expect any of the top (measured by capital, say) 50 banks to fail it?

C'mon.... the stress tests have about as much credibility as did any of Tony BLiar's or Gordon McBroon's (you know, the guys your sainted employer still serves as a lickspittle to...) pronounciamentos.

Given the stress tests were devised by the same politicians that can't produce a set of accounts worthy of being signed off by their auditors and also declared Greece's economy was acceptable for joining the euro the level of faith that can be given to this report is precisely zero.

Is there a list of those banks that only marginally passed? Or even better, a complete list from healthiest to sickest?
It might be interesting to see if, for instance, Santander are sick, mildly poorly or in rude good health, especially given their aggressive UK advertising campaign to ask Joe Public to swap current accounts to them.

Stress tests: Not many dead

Move on nothing to see here.

The real test will show when the low interest rate environment phase comes to and end and the Euro comes under pressure from speculators and more EU money supply issues arise.

It is only a matter of time ... the current holding phase is predicated on the assumption that there is a global economic recovery just around the corner ... well there probably isn't and so the stress testing is carried out under relative benign conditions with banks unwilling to lend to business but unwilling to foreclose on bad property loans.

There is plenty to unravel yet ... what we don't know yet is what will be the catalyst for many of these problems becoming 'active'.

As expected it's a PR excercise waiting to go wrong, AIB are said to have passed the tests providing it can raise 7.4bn euro by the end of the year, which even with asset disposals is a fairly tall order.

Given details like this (and I haven't gone into all 91 banks) headlines stating a 3.5bn euro capital shortfall are totally disingenuous.

The main headline on the website is 7 banks fail test WHY NOT SAY 84 PASSED. Your organisation revels in misery. It is not bad reporting to accentuate positives sometimes.

The only REAL and relevent test is the reality test, which I am sure will surface at some point.

A useful test would tell the important people (the users) how much stick each bank can take before it fails. Then we could make our choices.

This shows nothing.

Any bank that has stated high amounts of PIIG debt will now be toast

All of greeks banks hold ONLY greek debt. Those that watched the torture will now perform the slaughter. The weaker banks ALL hold their own sovereign debt!!

And the stronger banks in Germany for example hold the a majority of the southern european debt

and this is just after a second bailout

By not including sovereign debt in the tests, but stating it on the press releases must go down as the biggest calamity in financial politics.

I am really going to enjoy next week.

#6. # Martin wrote:

"Given the stress tests were devised by the same politicians that can't produce a set of accounts worthy of being signed off by their auditors"

If you are slagging Europe off you should note that the reason that the accounts can't be signed off is the actions of the sovereign states not of European Union!

If on the other hand you are having a pop at the fact that the regulations that cover producing accounts for banks are about as much use as a one legged-man at an arse kicking contest, then I agree with you. Were the accounts used to pass theses tests really fully 'marked to market' (let alone to Basel 3)? I doubt it.

I repeat my demand that all UK deposit takers/banks are subject to the same tests and that these tests are published PDQ.

Did anyone expect different results...If the government took all the bad loans from the banks and gave them large amounts of money in a stalled economy with no one borrowing they should have some capital on hand. The banks are loaning back the government provided, taxpayer underwritten, monies with interest so they do not have to suffer the impact of the crisis they created and the governments think everyone should cheer about that. Nice that they are doing well when everyone else is not and the reason the others are not is because of the unethical behaviors of the bankers and the boards. Fine example for the next generation...rob big...it pays off. All this should result in good bonuses for the bankers....why not, you have provided the money to pay them.

wasn't it only a short time ago that everyone was calling foul on the banks? Now they're just about balancing the books (on paper at least), people are still on their case. If nothing else at least a half-eyed glance at their balance sheets is better than nothing at all isn't it?

This is pretty close to farcical. The tests in the US - not much better but were conducted in a fairly frenetic atmosphere and did at least something to shore up confidence: this will do the reverse. It will confirm that as the bank analysts pull the figures apart that there is a truly collosal amount of capital raising to do, as well as a drastic amount of consolidation/reorganisation.. Cajas, Landesbanken for starters but there are plenty more. If, as argued, UK banks need to find some Β£390 bn of replacement funding deposits in 2010 alone and far more in 2011, where is all this extra capital going to come from that is needed as part of the Basel capital buffer? Banks can only generate interest from investors if they demonstrate that they are an attractive sector to invest in. Slower growth and unquantified and in some cases unquantifiable losses on loan books will mean that unless they offer the investors very attractive yields they simply will not make Basel III capital standards. None of this anticpates what would happen if there is a default event in one or more Eurozone countries. Understandable reticence, you do not want to acknowledge that prospect, yet w/o it this is an utterly pointless exercise.

I say ban high street banks from holding ANY sovereign debt.

This would put pressure back on Governments to stop them from spending our childrens money.

Just how many banks went bust as a result of the last banking calamity? Just how many governments and their taxpayers will still be paying for that bailout when the next one looms?

The Owl and the Pussycat went to sea
In a beautiful pea-green boat,
They took some honey, and plenty of money,
Wrapped up in a five pound note.
The Owl looked up to the stars above,
And sang to a small guitar,
"O lovely Pussy! O Pussy, my love,
What a beautiful Pussy you are, you are, you are,
What a beautiful Pussy you are."
Pussy said to the Owl "You elegant fowl,
How charmingly sweet you sing.
O let us be married, too long we have tarried;
But what shall we do for a ring?"
They sailed away, for a year and a day,
To the land where the Bong-tree grows,
And there in a wood a Piggy-wig stood
With a ring at the end of his nose, his nose, his nose,
With a ring at the end of his nose.
"Dear Pig, are you willing to sell for one shilling your ring?"
Said the Piggy, "I will"
So they took it away, and were married next day
By the Turkey who lives on the hill.
They dined on mince, and slices of quince,
Which they ate with a runcible spoon.
And hand in hand, on the edge of the sand.
They danced by the light of the moon, the moon, the moon,
They danced by the light of the moon.

So, not gale force 8 or 10, merely a 2 "Smoke drift indicates wind direction, still wind vanes"
Making too much information available will stir up the calm surface of the pool; always a mistake.
Only the politicians cans sort this out.

Who applied these stress tests, and who wrote the rulebook for them? From what RP says, it would seem that yet again we have the chimps watching over the zoo?

ps - Can anyone please tell me why the ΒιΆΉΤΌΕΔ needed two seperate Economics Presenters in Spain, at the exact same spot, to do two seperate pieces to camera on exactly the same subject, but for two seperate programmes this week??? We had Adam Whatsisname on Newsnight, and the everpresent Robert Peston for the Ten O'clock news??!!! Both with a backdrop of exactly the same 1000 empty flats. How can the beeb expect us to accept their learned knowledge on serious economic issues if their own economics are so messed up? Two presenters, two Crews?? How much did this all cost??

There is just too much skepticism from the above posters. Someone desires β€œfully 'marked to market'”. And for what purpose, please? Can you not get it in your head; there is no one else out there to buy the whole lot of depressed sovereign debt. The marked downs which you highly regarded is just a reflection of β€˜plays in the credit default swap markets’. These same β€˜players’ are not in the market to buy the very thing they devalued. Too much credence is given to unreal presumptions and dubious opinions of β€˜Wall Street investment-gamblers’.
Then, there are the legacy fears β€œFine example for the next generation...rob big...it pays off” and β€œspending our childrens money”. If you cannot take care of your own selves now; why should you worry how your children will be doing in the future? Only being spouted are criticisms without relevance. In case you are not aware the effected countries of the Asian Financial Crisis, Indonesia, Thailand and South Korea had paid off their IMF loans. If you can show that the PIIGS are not trying, then, I, too, would grieve for your children. As far as I am concern, these readjustments in national economies management will succeed if we leave out the β€˜Wall Street investment-gamblers’ and their shenanigans. Concentrate on the real stuff: the fiat money pumped out by the governments. Not the funny money floating in the derivatives market.
The stress test is of no real economic value. But, I reckon that those who abhor the niqab, just simply love β€˜putting on the financial make-up’.

17. At 8:08pm on 23 Jul 2010, Chris wrote:
wasn't it only a short time ago that everyone was calling foul on the banks? Now they're just about balancing the books (on paper at least), people are still on their case. If nothing else at least a half-eyed glance at their balance sheets is better than nothing at all isn't it?

It's better than nothing at all. But I suspect a lot of folk are remembering that a fair chunk of what they're balancing their books with is taxpayers' money. Not only that, but folk are watching their pension funds squeezed by a 0.5% base rate while businesses that need loans are servicing high interest repayments at a time of recession - still, if it helps the banks to balance their books, eh? And one can't help but think that their books would be even closer to balancing if they weren't paying out eye-wateringly large bonuses. Still, can't be helped, eh?

In '09, major international banks had people around the world unloading their shares, were in a severe downturn of non-retail business, had retail customers wanting their cash deposits back, had a growing queue of potential mortgage defaults and were finding it really hard to find (borrow) cash because central banks had slashed interest rates to the bone.

Now that was a stress test.

And not just for the banks.

So we have nine dead (failed the test against 6% capital adequacy) out of 93 - it would be normal in any crisis to have a significant number of 'severely injured' as well.

Presumably the markets will pronounce the nine as 'untouchable' on Monday as well as identify (from the information published) another dozen or two who are 'dead men walking' and who can be destroyed over the next few weeks by ruthless speculators, short sellers and hedge funds.

This is all a smokescreen for ECB money printing.

The yanks are doing it....so lets dance ?

Oh dear, the Dance of the Red Death ?

Having witnessed the vile perfidy and corruption of the bankster GAMBLER ADDICTS in the Wall $treet CASINO over the last few years, I don't have a lot of faith in these so called $tress tests. Smells like rotting fish... and I think the $heep dogs (regulators) have sided with the wolves (banksters)! Furthermore... the $tress test exercise, even if it was legitimate, seems a feckless endeavor. Ol' Coyote Knose... there is 1.25 to 1.4 QUADRILLION dollars of toxic derivative paper (hedge fund gambling debts) floating around out there on the global markets. Come on! Who you folks kidding?

Peston, Hewitt, Flanders... methinks the ladies doth protest too much, for too long, and in an increasingly shrill manner. Why not just admit that your little campaign is over, that you were wrong all along, and that the euro and the eurozone are not only here to stay, but that one day the UK will be crawling on hands and knees to be join. Not that you will be necessarily admitted, what with your penchant to solve monetary problems through "quantitative easing", and all. But, we'll consider it.

Interesting timing for the release of this information.
It gives the leaders of Eurozone Convoy PQ17, a whole weekend to pump up a few life rafts and ask the circling U-Boats to go easy, before the torpedoes start arriving on monday morning.
The weakest banks need to attract the most investment to survive. How does that work in a, 'free market', economy then?
Oh, it comes out of my pocket, what a surprise!
Isn't capitalism great!

As everyone knows, if the test is too hard, bank failure will become a self fulfilling prophecy. If it is too easy, it is meaningless. The interesting point isn't how many failed, but how many felt that they were near to failing. If sufficient respond by making themselves more robust then the stress test will have done what it set out to do which is to make the banking system more stable without causing a meltdown. It is up to governments and markets to lean on these weak banks.

Those who are disappointed that not more failed the stress tests, what is their motivation? A genuine concern for the system, or disappointment for an opportunity denied to make a bit of money? The other motivation is to boost their own status. If they make a vague statement saying that more banks could fail, their prophecy will be forgotten if it does not come to pass. But if there is a failure then they will remind everyone of their prediction and hope to be labelled as some sort of guru and charge guru rates for their advice.

I find the polemic "spending our children's money" an interesting one. I am not denying there is a problem which stretches out into the future and this must be resolved. But the "spending our children's money" is an emotive over simplification.

A lot of money has been spent on education, health even benefits in the hope of giving children a better start in life. Most parents have done exactly the same in that they spend money on their children now, knowing that there will be less money available in the future. Many even get themselves into debt in following their objectives and rely on their children's support in later life. Now, quite obviously the successive governments have not spent the money wisely and have spent too much and they should be rightly condemned for that. However, the implicit criticism that the present generation is 'spending the children's money' for their own gain now is not entirely true.

I don't expect any kind of overreaction (or indeed any action) from the markets regarding these tests, I think the results were as expected and this has already been figured into their strategy.


One of the unintended consequnces of these stress tests is that it might assist an acquisative bank (perhaps a recently well funded one that used to have more interest in tractors) pick likely targets and pinch points to squeeze in order to aquire said banks more cheaply.

Given the amount of information I have read in this and other ΒιΆΉΤΌΕΔ Blogs concerning the demise of the Euro, I would like to know who stands to benefit from the breakup of the Euro and why is the Euro being singled out instead of the Japanese Yen, the English Pound or the US Dollar all of which are heavily burdened by Soveriegn debt?

@ 25. At 11:15pm on 23 Jul 2010, Up2snuff wrote:

> In '09, major international banks had people around the
> world unloading their shares, were in a severe downturn of
> non-retail business... Now that was a stress test.

... and loads of banks failed it utterly, because
bankers are clods. But are the lamebrains gone now?
That's what the new tests needed to show us.

But they showed us nothing. As far as we know,
the nitwits are still holding onto their jobs
like limpets.

26. At 00:08am on 24 Jul 2010, Chris wrote:

> Presumably the markets will pronounce the nine as 'untouchable' on
> Monday as well as identify (from the information published) another
> dozen or two who are 'dead men walking' and who can be destroyed
> over the next few weeks by ruthless speculators, short sellers
> and hedge funds.

That won't work because we'd all know the lame-ducks. It'd be
a safe bet for us all, not just "ruthless speculators, short
sellers and hedge funds".

ΒιΆΉΤΌΕΔ Business Website in Talking the Euro Down "Heads I win, Tail you Lose' Shocker!

This game is almost up boys. You've thrown every negative spin you could at the Eurozone, while conveniently forgetting a rather large elephant in your own room and a huge stinking Goliath of a problem over the Atlantic. When people give up trying to make a self-fulfilling prophecy from the Eurozone - a daily stress test that neither the dollar nor the pound have yet experienced in this downturn - they'll be after someone else. Remember the last time the money-men smelt the fear in Sterling?

We'll remember who our friends are when this is all over. This continuous shrieking of "Take them, spare us" will be remembered.

No one is surprised about the results. Over a week ago I posted on here about the tests and that its all smoke and mirrors, but who cares. I for one have been buying shares in the top 5 banks like there is no tormorrow because it was all so damn predictable. Just watch these babies grow now.

So - no proper shocks applied in the stress-tests (as widely predicted), feeble results.

There is a good technical reason why only shocks will do, and hence why 'haircuts' are not enough - all established ages ago by the BIS et al.

It is because gradual degradation of conditions (as represented by a haircut) allows banks etc to re-optimise their positions in the new circumstances, which will generally result in a better outcome. In shocks, they don't have the time to do this - which is why in stress-testing.

We don't want the banks to be over-capitalised so there is no point in setting unrealistic stress tests. This was a good step in the right direction and there will surely be more stress tests in the future.

No Surprise no.210.
The Stress Test has not passed it's stress test ???

What about this bank??

Inflation over 3% and 0.5% BOE rates, and ''everyone'' is surprised at over 1% GDP growth.
When will the BOE raise interest rates ??

In the past they have said they do not like looking into the future too much but n-evertheless, have indicated that they ''expect inflation to fall''.

In my opinion BOE rates should have been at 2% several months ago

If they (BOE) don't raise rates this next time, 5th Aug, I'm abandoning all support for the crew.

@ 32. At 08:00am on 24 Jul 2010, Boilerbill wrote:

> However, the implicit criticism that the present generation
> is 'spending the children's money' for their own gain now is not
> entirely true.

Most of it goes on fancy new cars - just take a drive down the motorway,
and you'll see the true situation. They HAVE been spending the children's,
money, on trinkets that will have barely any value in 10 years.

Afternoon Robert,
I think that during the euphoria over all of our banks being declared stress free we need to look out for the other bad news that is being buried.
One item that caught my eye was the announcement by the Asset Protection Agency (which looks after some of the toxic assets from RBS) expects losses covered by its insurance to reach Β£57 BILLION. Who has to pay for this loss? Isn't RBS cast in a better light by parking these liabilities somewhere else? Didn't Barclays pull the same cunning stunt with some of their liabilities to the Caymans or somewhere?
Did the stress tests take these into account or did the banks simply answer the questions asked with a simple yes or no with no qualification?
I think we should be told.
The Bankers and The FSA (their organisation) still haven't understood that their cleverness got us into this mess and to continue to be economical with the truth to their owners and lenders of first resort will provoke such outrage and anger if they do it again.
The Tier one ratios are published now considering the worst case put to them and the results were Barclays 13.7%,RBS 11.2%,HSBC 10.2% and Lloyds 9.2%.
I seem to remember the target figure of some 12% Tier1 was required when Lloyds put their case for a takeover and bailout. Maybe that explains why Lloyds have recently revised their overdraft charges and have stopped paying nominal interest (0.1% gross) on current accounts in credit. As one marketing slogan puts it "Very Little Helps".
Have a nice weekend all.

@ 7. At 5:41pm on 23 Jul 2010, sunk_optimism wrote:

> Is there a ... list from healthiest to sickest?

No. Bankers are too sneaky to publish anything useful. The graspers will use that data to place bets themselves, of course.

@ 31. At 07:36am on 24 Jul 2010, Boilerbill wrote:


> As everyone knows, if the test is too hard, bank
> failure will become a self fulfilling prophecy. If
> it is too easy, it is meaningless.

According to my child, GCSEs are graded A, B, C, D, E, F or G. Bankers havn't been able to figure out how to do that yet, maybe because they are too thick or too sneaky?

I think that some of the countries that have joined the European Union should have had a stress test before they were allowed to become a member, Spain and Greece were not industrial countries most of their income came from the tourist trade, and only developed due to money in grants from the EU, and now these two countries have an unstable economy, and the East European countries that have joined the EU, had backward economies, before they joined, it must have been a risky business for banks to lend them money,

45. At 7:22pm on 24 Jul 2010, Jacques Cartier wrote:
@ 31. At 07:36am on 24 Jul 2010, Boilerbill wrote:


> As everyone knows, if the test is too hard, bank
> failure will become a self fulfilling prophecy. If
> it is too easy, it is meaningless.

According to my child, GCSEs are graded A, B, C, D, E, F or G. Bankers havn't been able to figure out how to do that yet, maybe because they are too thick or too sneaky?

----------------------------------------------------------------------
Ah, but that's where the regulators and politicians come in, mon ami mate!

Have a good weekend. Hey! Let's be careful out there tomorrow.

I have a thought for all the bankers and their apologists who have time and time again come onto these boards and declared triumphantly that the financial crisis is over, or that it isn't as bad as people are saying it is, that the government will soon turn a comfortable profit from its shares in the banks, that there will be no more problems, no eurozone government debt default and no further bailouts blah blah.

I wonder that, if, on the off-chance things don't actually get better after all, if we don't magically return to sustainable and meaningful growth, if we have either crippling and sustained deflation, or vicious and lethal hyper-inflation, or indeed a full spectrum economic meltdown, including massive bank failures, currency collapses, and the loss of hundreds of thousands or millions of peoples life savings, ruined pensions, and the impoverishment for decades to come, of the west, and a debt legacy that will hobble our descendants, if, any of these scenarios come to pass, will the bankers who have denied so vehemently and confidently the possibility of the fall of their beloved system, actually do the decent thing and fall on their swords, as, I suspect, the world post-economic-disaster will simply not require such deluded, conflicted and compromised souls?

Well the stress is over and the results are here - except all we know is if it's a boy or a girl - we don't know anything about the health of 'our baby'.
I'm sure everyone will take the results to mean whatever fits their argument - but I wonder if it even matters when the banks close...

48 Warwick:
Seconded. Well said.

If the bankers had *created* the wealth instead of filching it off the rest of us, there wouldn't even be a problem. Insane greed has led these people to lose their compassion and humanity.

They have no shame.

---

Anyway, back on topic, Euroland says Greece can't/won't/doesn't default and the bank bailout has worked. Great.

Perhaps it means that if the markets act against the interests of Greece or the Euro banks, we might have a sequel to Robert's article "Europe's dangerous contempt for markets". That would be "Markets' dangerous contempt for Europe" and explain how our elected representatives are using whatever measures are necessary to neutralise empowered insane greed. Great again.

It's not just the banks that need their teeth pulling.

Are we all mugs?

The US banks have all but one repaid their bailout money. The UK will follow. Its not difficult to repay your debts if you can borrow "money" for nothing and get you "kicks for free"

The last 2 years have all been about repaying and rebuilding the balance books of as many banks as possible while slight of hand "demanding the banks lend more"

No doubt the idea was to hoover in all that free flowing repayment back into the lake of QE funny money it came from - constricting the inflationary pressure of keeping the tap on.

But did it work? Has it worked? Is it working?

The capitalist repair model on the face of it seems to be getting back on track. The banks in the US are re-strengthened, but nobody can borrow, do they want to borrow?

The UK is growing on the back of construction and services, financial services!! HOW IRONIC

We are growing the highest rate in 4 years on the back of property inflation and a corrupt financial model that the last 2 years has not changed. Good old UK, our futures rely on boom, boom, small stress tested bust.

Then we have the snake in the harem - Spain,Greece,Portugal and the like all pulling on Germanys belt.....this is the part of the banking recovery plan that has not gone to plan and it will now strike out in venomous tongue as one by one the constriction of money to prop up economies that rely totally on servicing populations that consume are starved

The question is now,how far reaching will the implosion of financial Europe be?

One brief question.

Knowing that the Eurozone banks have passed the stress tests how many more people are going to go out and buy Eurozone banks shares on Monday than were before the results came out?

The possible answers are

a) None.

b) Very few.

c) Quote a lots.

d) Everyone because if the EU says things are fine then they must be.

My bet is either a) or b).

Anyone who thinks it is c) or d)? Well a fool and his money are soon parted.

I think only 7/10 for this piece of "glossing over," by the EU. They've generally got this down to a fine art and tend to do it better.

But I've never seen a more shifty looking bunch of Central bankers as those appearing at the CEBS press conference broadcast (on Newsnight)on Friday night.

Looking at bank balance sheets isn't everyone's cup of tea. But to refuse to factor into the equation the possibility of an EU member sovereign debt default, at this time, is more than a tad deceitful, if you're actually going to bother doing a stress test now. It's this deceit that is the issue, more so than the "stress test." And of course a stress test that DID factor in such an eventuality might not have looked very pretty, in fact pretty bl**dy awful?

Still they've given the people what they (well most of them) wanted and that's what they're paid to do.

But someone has definitely tried to pull the wool over - obvious really. Those in charge of running this "club" need millions of compliant human members to prop up the edifice. Those in charge simply dare not, must not, burst the illusion of having things under control. But being straight with masses of people has never been a good idea when there are huge vested interests at stake.

So the €8.7 trillion question is, will the banks now start lending and will the borrowers now start borrowing, please?

Possibly these stress tests could lay to rest some vexing issues of whether or not eurozone banks have now got their balance sheets back in order and are recapitalized, though based on some of your calculations Robert it seems governments will have to start praying that banks will now jolly well use this slimmest of capital margins to start to get cracking and get some growth figures on the board by the end of year...