EU Bank Stress Test Was Unrealistically Easy

While more European financial institutions failed the bank stress test, the test only imposed unrealistically easy “stress.”

euro house

According to ZeroHedge, the so-called “stress test” for European banks was missing real stress that might occur.

Just when you thought the humor out of the central bank that just released a stress test whose adverse scenario did not even assume the most likely Eurozone outcome, i.e., deflation, couldn’t get any better, moments ago we learned that the test, which was supposed to restore confidence in Europe’s banking system and in the oversight and regulatory abilities of Europe’s central bank, had “errors and inconsistencies” which forced the ECB to “briefly remove from its website” the results of Italy’s most insolvent bank, Monte Paschi, “after discovering an error in its key capital ratio”, a bank which based on the ECB’s (faulty?) failure assessment was halted countless times earlier today after crashing so hard the regulator had to ban selling it short. Again.

Apart from the other problems, not even testing for deflation (in the midst of falling fuel prices) seems breathtaking in its stupidity. But as for the other issues:

The WSJ tries to put some lipstick on this latest Snafu by the former Goldmanite in charge of Europe’s money printer…

The Wall Street Journal article describes a string of incompetence as if none of it was a big deal (It is quoted by Zero Hedge but the link is broken).

[See also, “Bank Failure Spreading but We Keep Pretending.”]

While the tests have been going on since last year, European officials were scrambling until the last minute to finalize the data. On Sunday morning, barely an hour before the results were due to be released, the EBA official in charge of the stress-test process was still scrambling to rubber stamp the numbers, causing him to show up 10 minutes late to a briefing with journalists.

So these are the people who are protecting us and our financial institutions? People who are “scrambling,” and “still scrambling to rubber stamp” numbers? People who are so tardy in getting the job done that they show up ten minutes late for a press conference?

It seems to me that not only have more banks failed, but the entire “oversight” bureaucracy has also showed a failing response.

Other nuggets of news: There were problems with the data from Deutsche Bank, in which two legal adviosors have committed suicide in the past year.

If that doesn’t build your confidence in the banks, I don’t know what will.

Also the Polish banks did not even turn in their data on time. So the “European” stress tests did not include all of the EU.

The WSJ blithely tells readers that “the issues are isolated” so “don’t lose faith or confidence, in Europe’s confidence building exercise.”

Right, that’s a great way to present a “confidence building exercise”—as a process full of so many problems that the mainstream media is forced to reassure us about the process which was suppose to restore our faith and confidence in the banks.

What a house of flimsy cards!