Europe Delays Second Bank Stress Test Due To "Unrealistic Assumptions" And "Errors"

Tyler Durden's picture

Remember when the European Stress Test round 2 was supposed to be "credible" and restore "confidence", this time for realz? Well, as Reuters reports, "A second round of data gathering is needed for the European Union's health check of banks because of "errors" and "unrealistic assumptions", the European Banking Authority said on Wednesday. Arising from the peer review and quality assurance process, the EBA is currently assessing and challenging the first round of results from individual banks," the EBA said. "This will mean that another round of data will be required from banks. Errors will have to be rectified and amendments made where there are inconsistencies or unrealistic assumptions."  Data from the second round won't be received until mid to late June -- the time when the EBA had indicated it would publish the results of the test. What else could one expect from a continent which is run by a bureaucrat who has openly admitted he lies to prevent a crash in the EURUSD.  Plus really: who gives a flying fornication? At this point nobody, and we mean nobody, believes that any bank in Europe is even remotely not bankrupt. It is time for the kleptocrats to actually save the taxpayers some money and just pull the whole farce.

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Alienated Serf's picture

dominoes falling everywhere, this is gonna be a fun summer.

i'm sure a collapse of all their euro denominated tier one capital will help.

Cash_is_Trash's picture

You can't kick the can down the road forever.

AG to $39 before COMEX close.

writingsonthewall's picture

Oh they're going down like.....dominoes?


Check out the Glencore price today after this story broke.

Whoops - now it's below the IPO price.

Next up - Linkedin - and which morons said this wasn't a bubble?

LRC Fan's picture

Meh...Dow doesn't give a fuck.  We still will close much higher. 

TruthInSunshine's picture

To the rabbit hole.

There is no spoon.

Greenspan, all shroomed up in college, once doubted his own existence, until he changed his mind, and now, after watching Bernankstain in action, he is re-thinking his position yet again.

Right now, Greenspan is watching a lit candle slowly melt, and reading Kant & Hume, and thinking hard...

Cdad's picture

Hey man,

What are you doing in my cosmic bunny hole?

TruthInSunshine's picture

The bunny hole is the communal wading pool of last resort for the aware or seeking-awareness when the 'real' world becomes more surreal than alternate reality.



augie's picture

Don't forget the first rule gentlemen.

TruthInSunshine's picture

This is fight club or no peeing in the pool?

Cash_is_Trash's picture

Think the shit will fall on Greenspan instead of the Bernank?

I think so.

TruthInSunshine's picture

I think it's a fair statement that Greenspan was the first to tamper with the limiter on the throttle body, but Bernanke & Crew have implemented fiber optic throttle.

oogs66's picture

well its nice to have confirmation that the stress tests were as much of a sham as people here thought right from the start.  it will make me feel better when they ram my es short up my...

Josh Randall's picture

LIESMAN delays stepping on scale due to "Unrealistic Assumptions" And "Errors"

francis_sawyer's picture

The next time I play golf, I'm not going to start keeping score until I've notched 3 consecutive birdies...

It's called "equitable stroke control"

francis_sawyer's picture

In USGA scorekeeping... "Equitable Stroke Control" is designed to keep a player from sandbagging...

In banking... It's used to facilitate sandbagging...

wandstrasse's picture

In Germany they think the word 'stress test' is sexy, thus we also use it for security observations of nuclear power plants (triggered by Fukushima). And the population, instead of laughing their heads off, thinks 'hey, if they do stress tests at the plants, everything is safe, fine!' Germany could be a good nation, but forget it, it is so sad.

Franken_Stein's picture


7 of the powerplants are to be decommissioned, effective immediately.

No stress-test, but off-line.


firstdivision's picture

In German, the word 'stress test' is pronounced 'shizen brust'.

wandstrasse's picture

do I hearr undertones zat we Germans do nott prrronounce English werry well?

TooBearish's picture

EUR next strongest CCY on board today to CHF

lizzy36's picture

I assume the last sentence is rhetorical.

It is NEVER time for the Kleptocrats to save taxpayer money. Especially when banker bonuses are at stake.

The US should consider exporting Geithner to euroland to help them out with this matter. Nobody is better at turning a farce into a "hope and change" moment than Tiny Tim.

Btw tyler, totally stealing flying fornication. May or may not give credit where it is due ;)

augie's picture

"unrealistic assumptions"? what are they getting their metrics from the BLS?

Urban Redneck's picture

This was still valid for the FORTHCOMING "stress testing" as of YESTERDAY May 31, 2011.


Example 1
Treatment of a long sovereign bond position

A bank holds for trading €100 of 10-year Spanish government debt which is not hedged at all. The fair
value of this position on 31 December 2010 is €95.

For the baseline scenario, the bank does not apply any haircuts. The bank must take into account an
increase in Spanish sovereign yields of 43 basis points. The bank loses approximately €3.14, equivalent to
a haircut of 3.3%, on the bond it holds and reports the loss as due to general interest rate risk.

For the adverse scenario, the bank applies a haircut of 14.6%, as given in the table of haircuts for 10-year
Spanish government debt. The loss of €13.88 (€95 times 14.6%) is split into two parts: €3.14 reported as
due to general interest rate risk and €10.74 reported as due to widening of the sovereign credit spread.
The latter loss is equivalent to the contribution of the credit spread to the haircut of 11.3% (see Table 3).

Refer to Annex 4 for detailed Sovereign Shock Parameters

Anonymouse's picture

That's insane.  Markets NEVER go down 3.3%.  Much less 14.6%!

Correct me if I am wrong, but I believe in the history of all markets (except AU and AG of course), no asset has ever gone down.

Why should banks be held to such a rididculous standard.

A more realistic assumption to use would be a stress case of only +7% GDP growth.  (Well, perhaps +9%, but let me see the +7% results first before we determine if that is too pessimistic a case to be realistic in a stress scenario).


augie's picture

God damn urban, thank you so much for that insight. Bonds is one area where my knowledge is severely limited. I really appreciate the post.

Archimedes's picture

And GM sales down 1.2%. Come on Tyler, post the channel stuffing chart. I like looking at it!

carbonmutant's picture


The former chairman of Egypt’s Bank of Alexandria was held overnight at New York’s Riker’s Island jail complex after being arraigned in Manhattan on charges of sexually abusing a maid at the Pierre Hotel in New York.

Manhattan judge Gerald Lebovits around midnight last night set bail for Mahmoud Abdel Salam Omar, chairman of El-Mex Salines at $50,000 bond or $25,000 cash, according to the Manhattan District Attorney’s office. Omar also was ordered to surrender his travel documents, prosecutors said.

augie's picture

I guess that's how the elite cull their own.

Boilermaker's picture

It's gotta work better than the truth!

RobotTrader's picture

The fix is in, here comes another fabled "v-bottom".

No way the PigMen are going to let the XLF drop any further, otherwise their livelihoods are at stake.

Internet Tough Guy's picture

Momo, you are still a perfect fade.

Crisis now over, nobody needs gold, but they are clamoring for bank stocks
RobotTrader - Mon, May 30, 2011 - 10:55 PM

Heh, so typical.


lieutenantjohnchard's picture

as his seed capital continues to diminish even with his paltry 30% commitment of widows and orphans stocks the unemployed, part time contract 1099 processor posts ever more at zh and yahoo finance to distract himself from looking at the sea of red on his etrade portfolio screen.

it was just yesterday that the unemployed, part time contract 1099 processor was telling the world the stock market was poised for lift off to new highs, and for everybody to go long, except himself.

Internet Tough Guy's picture

Always fade him. He's money in the bank.

SheepDog-One's picture

MomoFader, 2 weeks ago- 'The markets are not pricing in QE3, the markets are pricing in a robust consumer driven recovery'

lieutenantjohnchard's picture

very nice. so much material. so little time.

High Plains Drifter's picture

again with the stress test? this joke never ends does it?

redpill's picture

Unrealistic assumptions and errors?  Are they using the BLS birth/death model?  X-12-ARIMA perhaps?

BlackholeDivestment's picture They are just ''buying'' more time, with ''our labor'', until it's the ''Scottish Rite'' time for the 9/11/11 NWO Emergency Hopium Withdrawal Crisis Call, the call that's right for the dealer(s), Benny and the Chairsatan Jets?

SheepDog-One's picture

OK EU members...empty out your pockets on the table and count up the spare change lets see what we got!

TruthInSunshine's picture
Cleansing of the Temple
“ And Jesus went into the temple of God, and cast out all of them who sold and bought in the temple, and overthrew the tables of the moneychangers, and the seats of them that sold doves,

And said unto them, It is written, My house shall be called the house of prayer; but ye have made it a den of thieves.

”   Matthew 21:12-13
AcidRastaHead's picture

I never pegged Jesus as the angry type that throws fits.  I guess that boils down to errors and my unrealistic assumptions.

Anonymouse's picture

I believe that is the only instance.  Desecration of the temple was a serious affront to God.  Theft in the name of God.  "Doing God's work" if you will.

Marge N. Callz's picture

"Data won't be received until mid to late June."  Plenty of time to move their sovereign debt exposure from their trading book to their bank book.  Just like last time, most will pass with flying colors and weeks later will ask for help.

AcidRastaHead's picture

If a stress test is supposed to make an assessment based on a bad to worst case scenario and they cite unrealistic assumptions, then obviously their view of bad was unrealistically rosey.  Don't worry though they'll find the right mix of false inputs to get the desired final results.  As error prone and unrealistic as it may be, just as long as it doesn't hurt the markets.

Bansters-in-my- feces's picture

If any bankers are reading this......

............FUCK YOU's.......