European Bank Stess Test Joke: This Insolvent Euro-Bank and Group of Central Bankers Met at a Bar and…

Reggie Middleton's picture

This post will outline the second bank stress test joke of the day with the first one detailed in ““.
According to the MSM news outlets, Germany’s PostBank, along with
practically every other German bank except clearly insolvent and near
defunct HyPo have passed the stress tests. So have French top banks,
Portuguese, Italian, Finnish and Swedish banks. What? You’re not
laughing yet? You  know how we feel about the Spanish banks, so I will
not go there right now (but will leave a trail of links at the bottom of
this post for the uninitiated). What we are going to do now is focus on
the farce that is passing Germany’s Post Bank, a clearly insolvent
(1.4x over insolvent) institution whose only potential (and that’s just a
potential) saving grace is the possibility of a forced takeover by a
larger bank.

Let’s revisit a few pages from the professional subscriber document, file icon Deutsche Bank vs Postbank Review & Summary Analysis – Pro & Institutional (subscribers can follow along on pages 3, 4, and 5):

Now, I know this Texas stuff is for Yankees, but there is some
credibility to it. If one were to strip out the intangibles of PostBank
an compare it to practically any measure that has to due with collateral
value (most assuredly padded), impaired assets, or loss allowances,
this banks is INSOLVENT! No, I didn’t say in need of a nominal amount of
capital, I said I-N-S-O-L-V-E-N-T!!! Get the point yet? But it can pass
a European stress test though! It gets worse. Using the Eyles
test shows that its shortfall as a % of tangible equity is 175%!
Whaaaatttt???!!!! The banks is insolvent, nearly twice! I can go on, but
if you haven’t got the picture yet, you are either a European bank
regulator or you will never get the point. For those that are curious
re: the other metrics, read on… Over half of their holdings are junk!

Not only did the European tests not find Post Bank insolvent, they
declared it didn’t even need any capital. Why the European markets don’t
tank due to this f@#$%ing farce is beyond me. Below you can find
related European banking research.

Subscription research (Click here to subscribe)

Actionable Intelligence Note For All Paying Subscribers on European Bank Research
File Icon A Review of the Spanish Banks from a Sovereign Risk Perspective – retail.pdf

File Icon A Review of the Spanish Banks from a Sovereign Risk Perspective – professional

File Icon Ireland public finances projections

File Icon Spain public finances projections_033010

File Icon Banks exposed to Central and Eastern Europe

File Icon Greek Banking Fundamental Tear Sheet

File Icon Italian Banking Macro-Fundamental Discussion Note
File Icon Spanish Banking Macro Discussion Note

Interested parties can read the entire 50+ article Pan-European Sovereign Debt Crisis series by clicking here.

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THE DORK OF CORK's picture

There was a time when the Irish could at least organise a good piss up.

Now because of the fascist health police we cannot even play to our strengths.

nathan1234's picture


Now that the stress tests have been done you can expect a new issue of Derivatives to be sold to new suckers.

Thats the game being played!

RoRoTrader's picture

That is a snot kicking hit, Reggie........what else is there to say?

unionbroker's picture

great! now we have a real competition going in the race for the bottom

Goldenballs's picture

And lo it came to pass in the Valley of the Stress tests a Miracle occurred in that everything that was broken was mended and when the men in suits had gone,shortly after everything collapsed as no one realised that the fresh paint had masked the rust that for years had been eating through the system and as soon as real stress was placed on the system it presently collapsed.

 Bad money drives out good.


DoctoRx's picture

Reggie:  You left the "r" out of "stress" in the title.

Then of course, maybe the typo was fine-- as it wasn't a stress test in any case.  I may have given tougher stress tests to old men in my cardiology practice.

Racer's picture

ECB's Nowotny says EU stress test was tighter than US bank test

Well hurray for that... now that is good for a million point rally on the markets.



Doctor, doctor, I have a huge growth on my leg that is bleeding and looks really nasty

Don't worry, open wide and say AHHHHH....

My diagnosis is that your tonsils are perfect. You can talk, and you are alive and very well

AUD's picture

Gold down in Euros too. I guess there are no problems after all.

Thorny Xi's picture

When reality is uniformly swept, under rugs or anywhere else, there is no problem as long as people don't go under the rugs.

tahoebumsmith's picture

Well this is good news! I guess they can give back the trillion dollar bailout from the IMF seeing how they don't need it.. Kinda reminds me of the Dubai crisis, swept under the rug, no problems here.

MarketFox's picture

RM...another home run....


Seems like justice is a rather loose term...

How about FRAUD....?

How about accountability....?

Seems like the government is aiding and abetting FRAUD....


Purposefully inaccurate accounting standards...utilized for the sole purpose of not wanting to fully disclose....for monetary reasons....



mikla's picture


I don't even know where to begin here:  REGGIE DOES THE MATH.  Apparently bank presidents, "Risk Managers", auditors, regulators, "reporters", financial "analysts", ratings agencies, and central banks DO NOT do the math.

I be lovin' my Reggie.  I be not sharin' my lovin' for those other groups, who daily show their incompetence, criminal negligence, and travesty of existence against the suffering populace.

When I'm President (or Benevolent Unquestioned Dictator), I'll make Reggie my Treasury Secretary simply because he can use both fingers and toes to count, apparently unlike these quadriplegics that merely "deem" a number with no substance.

hooligan2009's picture

well now...CNBC is reporting that banking analysts globally have access to a line by line list of individual bonds per European bank for both the trading and non-trading books. If true, this makes the regulators and stress tests used for the US banking system a farce for not publishing the same level of detail.

We can now view and do our own stress tests at any level of stress for any European bank. This is the flip side if the scam that goes for US bank reporting. It is the positive of regulatory arbitrage.

US regulators don't dare require US banks to be transparent. European banks are now fully transparent.

Wonder how long it will be before we get the same level of disclosure at the central banks of the Fed and the ECB.

Who is going to win the race of a) a rational stress test that reflect the different business models of each bank and b) develops a fair value model that translates bank fails of stress tests into the zombie corporates who rely on bank (and state funding) to propagate a failed business plan?

Maybe there's a dodge (sic) to allow GM to buy out Apple.

InconvenientCounterParty's picture

Perception vs. reality: The whale of recoupling trades. tick tock....