European Interbank Liquidity Worst Since August, As Goldman Sees 89% Stress "Pass Rate"

Tyler Durden's picture

On one hand, there is speculation that the Stress tests [May|May Not] be relevant, [May|May Not] push equities to fresh [highs|lows] and will prove just how [strong|broke] Europe is - that's fine: it is all part of the expectation and the show that the Stress Test theater was from the beginning. On the other, 3 Month EUR Libor is as the highest it has been since August 23, 2009, as the market continues to lock up, and while it is still materially tighter than all time highs, when Libor was surging in the 4-5% range two years ago, banks did not have the explicit backing of every currency printer in the known Keynesian world. The fact that this indicator has been on a straight up path since April is the only thing European regulators need to explain.

But for those who just can't get enough of the [lack of] backstabbing in this year's season of the Stress-ful soap opera, here is Goldman's grade sheet.

  • 10 of the 91 institutions will not pass the stress test (for a pass rate of 89%), as per the average response.
  • Consequent capital raisings expected: Below €10 bn (9% of participants), €10-25 bn (33%), €25-50 bn (35%), €50-100 bn (18%), above €100 bn (5%). This implies a mean (at the middle of each range and assuming >€100 bn = €100 bn) of €37.6 bn.
  • 63% believe that the amount of capital raised will leave banks adequately (or overly) capitalized, while 37% see a capital deficit even post the stress test.
  • Banks domiciled in Spain, Germany and Greece are expected to raise the most fresh capital.
  • The source of capital is expected to be split between the public (51%) and private (49%) sector.
  • Opinions remain split on the performance of the sector in the 3 months following the stress test, with 38% expecting outperformance, 26% underperformance and 36% in-line performance

Overall, we grade the excitement level surrounding the season finale of the second season of the Stress Test soap opera at C+: enough to make people forget for a few hours that the world is bankrupt, but not enough for them to throw their life savings into the market with giddy fervor and reckless abandon.

GS Stress Test

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snowball777's picture

Maybe Euribor is blowing out because everyone is sucking in their gut for the test?

And will tighten up once the laundry is aired?


snowball777's picture

Not to be missed:

The schizoid histo chart on page 5. LOL

The fact that 3 of the 4 bottom ranked banks from their survey (other than Greek National) are from...<drumroll>...GERMANY!

Chartist's picture

I thought I saw on Bloomberg that the Euro stress test only looked at trading book losses.  Is this enough of a test?

Edna R. Rider's picture

What exciting announcement caused the last .5% drop in the spy?  BTW you have to love a market that goes up or down .5-1% in an hour about 10x a week.  Makes you feel really good about the future.

Misean's picture

If Calvin were given this Stress Test, he could doodle space aliens devouring Sally on the test paper and Miss Wormwood would still pass him.

But I love this stuff about "raising capital"...they're not "raising" anything.  They're being kept artificially liquid while sucking productive resources into a rat hole.  The bad debts built non-productive mal-investments, and now what bits of productive economic structure remain are being depleted just to keep the payment system ponzi running.

This should all turn out well.

bigdumbnugly's picture

sally?  u mean susie?

c&h best comic strip that ever was and ever will be.  period.

where is bill watterson now anyways?

Ragnarok's picture

How are the banks supposed to raise fresh capital (fresh, as in fresh of the press?) if capital markets are locking up?

tecno242's picture

it's really just dawning on me.. the entire world is going to keep sweeping this under the carpet, until what could have been vaccumed up in 5 minutes becomes a giant hairball monster that eats human flesh.

meanwhile, the worlds citizens will continue blissfully eating bon bons and watching american idol..

until the hairball monster is unleashed and bites their head off.

tecno242's picture

EXACTLY like that!

lay your eyes upon your future bon bon eating citizens of the world!


cocoablini's picture

Bad movie: Night of the Lepus
Man-eating rabbits.

cocoablini's picture

No sweat folks- even if euro LIBOR is constipated the US Fed will print a trillion dollars to assist the eurozone cover it's margin calls. That's right, we print US dollars so Europe can cover it's liquidity gap. The ponzi must keep rolling...

holsfhf's picture

these GS sell-guys&girls are truly amazing ;

nailed the low in Euro at 1.15 and the top in Euro 1.30-1.35 ..

like a glooooveeeee yet again

another coup de grace for the house one down for le clientele

if anyone can understand the stress tests GS can !!!



Commander Cody's picture

All things come from the GS.

Misean's picture

"if anyone can understand the stress tests GS can !!!"

They snagged the teacher's book before lunch and photo copied the answers.

snowball777's picture

I hear they have a nice transparent overlay that projects the dead bodies of which they're already aware onto the stress test results.

Anyone believe only Greece let GS play hide the debt sausage?

fallst's picture

Why do they borrow so much from each other anyway?


Daily repo phone guys beg for 5-6  billion...must have by 9:30 or pit boss gets nervous?

Help me with this.


Employees do shell game mime evertime I ask them this.

Grand Supercycle's picture

DOW/SP500 daily chart is bullish for now ...

M31Capital's picture

Maybe someone could explain this to me, but isn't Euribor rising as a result of Trichet removing liquidity or excess reserves.  In other words, to say that Euribor is rising as a result of banking stress is misleading, because we have seen a contraction in spreads.  Wouldn't true banking stress also be seen in the dollar Libor market?