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Here Are The 26 Banks Moody's Expects To Fail The Second European Stress Test

Tyler Durden's picture


Not like it matters much, because any bank that is found to be insolvent following the second consecutive European stress test will merely receive more taxpayer funds concealed as an SPV or a CDO or some other "complex" instrument, but for what it's worth Moody's has released a list of banks that it believes will either fail the farce, pardon, test outright, or will be "candidates for additional support going forward." As a reminder, the European Banking Authority (EBA) is about to publish the results of an EU-wide stress test involving 91 banks from 21 countries. The purpose of this exercise was to assess banks’ resilience to adverse external circumstances and to identify vulnerable banks, defined by EBA as banks whose Core Tier 1 (CT1) ratio falls below 5% under at least one of the scenarios included in the stress test. Moody's splits the sample into 4 Groups as follows: Group 1 : investment grade banks (at or above D+/Baa3 ) : 54 banks, Group 2 : non investment grade banks from peripheral countries (Ireland, Greece, Portugal, Spain) : 17 banks, Group 3 : non investment grade banks from other countries (Germany, Slovenia, Hungary, Austria, Cyprus) : 9 banks, and Group 4 : unrated: 11 banks. It is Groups 2 and 3 that are the focus of the analysis and which will be benchmarked against the test to determine credibility. As for the fact that all European banks are insolvent if just one is, just as all of Europe is bankrupt if Greece were to go under, that's a completely separate point.

From Moody's:

Banks from group 1 (see Appendix 2 and 3) are best able to absorb shocks. Any such banks which fail the test would very likely be downgraded in short order.

Banks from Group 2 (see Appendix 2 and 3) can be broken down into 2 sub-groups:

  • Sub group 1: banks from Greece (5), Ireland (3), Portugal (3) which have already received a great deal of external support. This assistance has been extended either in the form of capital injections – from shareholders or from governments – or in the form of funding obtained through government support mechanisms (e.g. guaranteed debt) or from the ECB.
  • Sub group 2 : Banks from Spain (6 banks). We recently published a Special Comment (Moody’s Estimates of Spanish Banks’ Capital Positions – Rationale, Results and Sensitivity Analysis – June 14, 2011) in which we estimated that, given existing capital shortfalls and loss mitigants (i.e.charge-offs, reserves, stressed one-year earnings and excess capital) and assuming stricter capital requirements published by the Bank of Spain in February 2011, the overall capital shortfall for Spanish banks amounts to approximately €45 billion in the base-case and to approximately €119 billion in a stressed scenario.
  • Both sub-groups are inherently weak and are candidates for additional support going forward.

Banks from Group 3 (see Appendix 2 and 3) : banks from Austria (1), Cyprus (2 ) , Germany (4) ; Slovenia( 2). The four German banks (West LB, HRE, HSH, Bayrische Landesbank) are undergoing major restructuring with public assistance. In contrast the Cypriot banks (Bank Of Cyprus Public Company Limited, Marfin Popular Bank Public Company Ltd) have large exposures to Greece, which makes capital buffers vulnerable to a potential Greek sovereign default in particular if the loss given default were significant.

Banks from Group 4 : unrated banks (11) mostly from Spain (9).

The full list of Group 2 and 3 banks. We urge any readers with money in these banks to pull their cash yesterday.

That said, as Moody's makes it all too clear: 'Liquidity risk: not assessed as part of this exercise; EBA indicated that “the liquidity profile of relevant institutions is being assessed by a specific thematic review, which is for supervisory purposes” (not to be made public)." In essence, the one most important component of bank viability will not be tested for at all. And these bureaucrats expect to be taken seriously.


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Wed, 07/06/2011 - 12:21 | 1430017 doomandbloom
doomandbloom's picture

relax...there will be no failure....everyone will be bailed out..

Wed, 07/06/2011 - 12:39 | 1430097 carbonmutant
carbonmutant's picture

Well maybe a couple of token failures to give the illusion of credibility... certainly no French banks

Wed, 07/06/2011 - 18:22 | 1431061 bankrupt JPM bu...
bankrupt JPM buy silver's picture

I have a fantastic idea, let me know if this works.  Why dont we all pool our funds together and create a bank.  Borrow from the morgue at 100X leverage and then blow it all on Ferrari's mansions and strippers.  And then either declare bankruptcy, or get bailed out-either way we win.

Wed, 07/06/2011 - 14:43 | 1430514 jus_lite_reading
jus_lite_reading's picture


BUT where the hell is National Bank of GREECE on this list??!?

Wed, 07/06/2011 - 12:22 | 1430020 sellstop
sellstop's picture

I was just looking at a silver chart and it occurred to me that that $49 print back in April was not the top. It was just the left shoulder in a much larger formation.

This banking stuff ain't over.....


Wed, 07/06/2011 - 13:34 | 1430269 Cash_is_Trash
Cash_is_Trash's picture

Yep, this $36 offer won't last long.

Paper money is going the way of the dodo.

Wed, 07/06/2011 - 12:22 | 1430023 slaughterer
slaughterer's picture

Don't worry: Problem solved

07-06 11:26: EU's Barnier says EU could look into possibility of suspending ratings on EU countries receiving bailouts Just extend the suspension to every bank in the EU. No problemo.  Ponzi On.
Wed, 07/06/2011 - 12:25 | 1430034 NotApplicable
NotApplicable's picture

They'll have Moody's doing this next. In the "National Interest," of course.

Wed, 07/06/2011 - 12:37 | 1430072 EscapeKey
EscapeKey's picture

That's excellent, because the problem isn't that the countries are bankrupt, it's that they are recognized as such.

Then again, who on earth would be stupid enough to invest in countries with "suspended" ratings? (Actually, the answer to that is 'insiders', who will be let known when there are bargains to be had).

Actually, I just had a great idea. When I was a nerdy kid, I used to collect stamps. Some of the rather dodgy mail order companies would promise "at least one rare stamp in this collection" + 1,000 "assorted" stamps, the premise here being the rare gem in the assorted group (which obviously never materialized, except for those individuals sampled in their ads). The ECB could start selling PIIGS bonds using the same mail order catalogue idea!

Wed, 07/06/2011 - 12:40 | 1430101 Fazzie
Fazzie's picture

 Who would invest in debt with suspended ratings? Why the Fed of course, by printing more monopoly money.

Wed, 07/06/2011 - 12:34 | 1430076 Dick Darlington
Dick Darlington's picture

And then there's this:

What an idiot! EU itself hasn't and isn't respecting it's own rules. Maastricht treaty anyone? They break the rules whenever it suits them but demand others to "respect" those same rules. Only thing i'm wondering is where the hell are the handcuffs?


Wed, 07/06/2011 - 12:53 | 1430142 Urban Redneck
Urban Redneck's picture

They are probably concerned that the agencies didn't get PIMPCo's memo that the currency war was over.

Wed, 07/06/2011 - 13:09 | 1430173 buzzsaw99
buzzsaw99's picture

The ratings agencies helped perpetrate the largest fraud in history. I hope they get bich slapped at every turn bitchez.

Wed, 07/06/2011 - 14:43 | 1430518 jus_lite_reading
jus_lite_reading's picture

AND they took three months to downgrade TEPCO!!!! LMAO!!!!!



Wed, 07/06/2011 - 12:23 | 1430026 Version 7
Version 7's picture

I can see the bank that holds my mortgage listed. Good.

Wed, 07/06/2011 - 12:26 | 1430039 gaoptimize
gaoptimize's picture

Notably absent: Italian banks.  Probably an oversight.

Wed, 07/06/2011 - 12:28 | 1430045 NotApplicable
NotApplicable's picture

Which bank is the Pope's?

Wed, 07/06/2011 - 12:36 | 1430083 hedgeless_horseman
hedgeless_horseman's picture

E) all of the above

Wed, 07/06/2011 - 12:30 | 1430043 Dick Darlington
Dick Darlington's picture

Hopium, sweet hopium. And when i'm high on hopium i turn into permanent denial.

From Moody's:

Sub group 2 : Banks from Spain (6 banks). We recently published a Special Comment (Moody’s Estimates of Spanish Banks’ Capital Positions – Rationale, Results and Sensitivity Analysis – June 14, 2011) in which we estimated that, given existing capital shortfalls and loss mitigants (i.e.charge-offs, reserves, stressed one-year earnings and excess capital) and assuming stricter capital requirements published by the Bank of Spain in February 2011, the overall capital shortfall for Spanish banks amounts to approximately €45 billion in the base-case and to approximately €119 billion in a stressed scenario.


So Spain's own stress scenario: max 15 bn in new capital.

Moody's base-case scenario 45bn and stress scenario 119bn.

Again: ROFL!!!




Wed, 07/06/2011 - 12:30 | 1430063 bank guy in Brussels
bank guy in Brussels's picture

Something I shared with Reggie Middleton earlier ... EU Commission authorities are realising that part of the defrauding of European banks these last few years, is due to the fact that Google Inc. has been censoring the internet in the EU and right in Brussels, leading to perhaps billions in losses for EU banks and businesses that are mistakenly 'trusting' to redress in the US legal system.

Google facing € 2 billion in fines and penalties ... My comments to Reggie, quoting the report now making the rounds of the EU Parliament and EU Commission:

Reggie - A new EU report not only about matters in Europe with some discussion of the banking crisis, but about the role in robbing European banks of one of your favoured companies, Google, Inc.

Reggie, I have friends at the European Commission, and I have talked to them about this. I can tell you they are definitely NOT liking Google - that is really understating it - as they realise Google has been censoring internet searches in Europe and Brussels itself, to directly deceive EU authorities ... not to mention help rob European banks and businesses out of billions of euros ... you know how government authorities can react when they realise a company has been playing them, deceiving them, and gaming them, like Google has been doing.

The EU is going to hit Google hard over the whole set of numerous cases here, with this now included as the most blatant anti-EU crime of all ...

Imagine Google Inc. after being hit not just with a maybe 2 billion euro fine, but also everybody in Europe knowing that Google has been censoring EU searches to rob them and to even help murder Europeans and to silence journalists ...

Maybe a little 'impact' on Google Inc.'s place in the world, perhaps?

Some excerpts from the article publishing the report to the EU, and a link to the full version:

« Report distributed today to the EU Commission and EU Parliament ... charging dominant EU search engine Google with multiple offences and criminal acts against EU citizens and EU authorities, and with Google internet search censorship to deceive EU officials and even to help murder EU journalists.

... quite shocking, but has many links to evidence files and relevant sources, making for a devastating indictment of Google Inc. before the European Commission. Google faces a possible € 2 billion plus EU penalty, and perhaps other sanctions, for the crimes and offences detailed

Report to the EU Parliament and the Commission of the European Union

Anti-Competition Crimes of EU Internet Monopoly Google Inc., to Erase EU Journalism

... anti-competition crimes of Google Inc., to erase EU journalism and block freedom of EU internet communications; ... with Google Inc. engaged in billions of euros of fraud against EU businesses and citizens; with Google engaged in direct deception and fraud of the EU Commission and EU Parliament, censoring websites which are accessible via Google search in Brussels ...

- Google 'Internet Gas Chambers' erasing EU Journalism, to deceive and defraud EU business, EU banks, and EU citizens out of billions of euros;

- Google 'Internet Gas Chambers' erasing EU Journalism, in a direct attack on the European Commission and European Parliament, Google censoring and controlling Google search results in Brussels, to hide information valuable to EU authorities; and encouraging threats of harassment, extortion and murder against EU officials, which may expand as Google Inc. continues service to US political mafias;

- This a case of anti-competition crimes by EU monopoly Google, more important than related Google anti-competition offences against Foundem,, Ciao!, or other victims of Google search engine discrimination, this being a case of Google Inc not just lowering search rankings, but entirely exterminating an EU journalist's work ...

- Even a penalty fine of 2 billion euros, may be insufficient ...

- What is very likely necessary here, is forcing a break-up of Google Inc., so that Google Inc. operates a subsidiary on EU territory, with Google Inc. providing guarantees that it will no longer censor EU journalism or other politically-related websites ...
and further that Google Inc., for the next five years or some other period, be forced to disclose prominently in large letters on all its search pages, that Google has been guilty of the crime of manipulating and erasing search results ... »

Wed, 07/06/2011 - 12:34 | 1430075 disabledvet
disabledvet's picture

wtf are you talking about?

Wed, 07/06/2011 - 13:49 | 1430319 doggings
doggings's picture

I read the link and it looks like the rantings of a nutter to be honest. 

can you supply any precise details on what exactly Google is supposed to have done wrong?  censorship of "what" exactly? 



Wed, 07/06/2011 - 12:31 | 1430066 mayhem_korner
mayhem_korner's picture

Can the eurozone outsource its money printing to Ben?

Wed, 07/06/2011 - 12:43 | 1430103 JW n FL
JW n FL's picture
  • [PDF]

    File Format: PDF/Adobe Acrobat - Quick View
    Eurodollar, 38-41, 51-52, 181 history, 37-38 negotiable, 34-35 ... also bankers acceptances, certificates of deposit, discount window, Eurodollars, federal funds) ... interest rate swaps and, 122-23 investors, 110-12 issuers, 108-110 ...
    Instruments of the Money Market - Federal Reserve Bank of Richmond


    The Fed Reopens Dollar Swap Lines to Avert Disaster on U.S. ... - CachedSimilar May 10, 2010 – One needs to understand the the Federal Reserve is not trying to help ... All in all, it isn't the least bit surprising to see the Fed reopen the swap window. ... the Fed receives euros and so with every central bank. ...



    Forget Trichet's Hawkish Comments, Here Are Three Reasons The Euro ... - Cached

    Mar 3, 2011 – On Thursday the euro surged (nearing in on $1.40) thanks to some ... The US Federal Reserve also runs a dollar swap window where the EU and ...

    Wed, 07/06/2011 - 12:32 | 1430068 SP666_OnTheWay
    SP666_OnTheWay's picture

    Fking banksters are now ready to execute the end-game.

    Bailouts will be drastically reduced for the coming wave of MASSIVE MASSIVE DEFLATION, right in time for their most ancient of ancient secrets.  ELENIN

    Wed, 07/06/2011 - 12:35 | 1430077 SheepDog-One
    SheepDog-One's picture

    I agree 100%. theyve got the sheeple masses in a bailout coma of calmness, all is well and even if theres any problem it will of course be immediately 'bailed out'. Nothing can be further from the truth.

    Wed, 07/06/2011 - 12:45 | 1430117 carbonmutant
    carbonmutant's picture

    It's a good thing the ISM numbers were down this morning or we wouldn't have a 55 point rally on the Dow today...

    Wed, 07/06/2011 - 12:37 | 1430090 disabledvet
    Wed, 07/06/2011 - 13:36 | 1430280 mirac
    mirac's picture

    Elenin could/should cause some earthquakes/Tsunamis.  Have you read Jim McCanney's book?  You might want to search Comet Elenin at for relavent articles concerning his theory and comets/asteroids.

    Wed, 07/06/2011 - 14:33 | 1430473 DoChenRollingBearing
    DoChenRollingBearing's picture

    That's a weird and interesting site.  Kooky!

    I was visitor 287.

    Wed, 07/06/2011 - 12:33 | 1430070 SheepDog-One
    SheepDog-One's picture

    All is well....any problem arises it will be 'bailed out' not sell your 401K's sheeple.....back to sleep now....

    Wed, 07/06/2011 - 12:39 | 1430096 Piranhanoia
    Piranhanoia's picture

    Is anyone dumb enough to trust a rating agency after 15 years of aiding and abetting the bigest fraud in history?   Is Moody's a criminal organization to support RICO activity for the folks that pay for legitimacy?

    Wed, 07/06/2011 - 21:48 | 1431489 sellstop
    sellstop's picture

    Lawyers and accountants trust rating agencys. It's the system....

    That is the freakin problem.

    It is also why we are in for another inflationary run....

    It is the time to buy the silver and gold.

    And I am not a goldbug. Just an observer.....


    Wed, 07/06/2011 - 12:43 | 1430110 Cold Hand
    Cold Hand's picture

    When is the release?

    Wed, 07/06/2011 - 12:44 | 1430113 disabledvet
    disabledvet's picture

    What about Deposit Insurance in Europe?

    Wed, 07/06/2011 - 12:48 | 1430123 JW n FL
    JW n FL's picture

    "The high-frequency community has been clamoring to gain access to Citi's retail flow," Keegan said. "With the introduction of Citi Cross, we will be exposing our HFT customer base to an amalgamation of our retail, institutional and broker-dealer flows at a point in the cue that works for all parties involved."


    Wed, 07/06/2011 - 12:51 | 1430135 Archimedes
    Archimedes's picture

    meanwhile the Dow is up 60pts....why?

    Wed, 07/06/2011 - 12:56 | 1430148 cosmictrainwreck
    cosmictrainwreck's picture

    you beat me to it: the "market" loves it.... WTF

    Wed, 07/06/2011 - 13:02 | 1430157 EscapeKey
    EscapeKey's picture

    It's Wednesday.

    Wed, 07/06/2011 - 13:07 | 1430169 cosmictrainwreck
    cosmictrainwreck's picture

    ha! <slaps head> you're right! I guess my copy of the script was delayed...

    Wed, 07/06/2011 - 13:06 | 1430164 Cold Hand
    Cold Hand's picture

    Dollar up, treasuries up, market up = external influx (government or whatever) but if the diverging trendlines on the SPY pull through, we should get a nice pop to the downside :-)

    Wed, 07/06/2011 - 14:22 | 1430441 candyman
    candyman's picture

    I thought just the opposite was supposed to happen, why the change today?

    Wed, 07/06/2011 - 12:55 | 1430144 Atomizer
    Atomizer's picture

    Same shit different year.

    Milan Placed Derivative Bet on Italy Default, Court Papers Show - 2009

    Wed, 07/06/2011 - 12:55 | 1430146 digalert
    digalert's picture

    No problem, we'll just ignore the rating agencies...

    Wed, 07/06/2011 - 13:04 | 1430159 karzai_luver
    karzai_luver's picture

    People ignore bigger frauds everyday, what's new.

    I am NOT BROKE and you are  commie/terrorist/dim/pug/socialist.

    Wed, 07/06/2011 - 13:09 | 1430175 Urban Redneck
    Urban Redneck's picture

    Moody's says everyone should pay attention to the shiny list of companies they have in their right hand, and ignore the small print of the EBA/CEBS test assumptions and guidelines hidden in their left hand (and upon which the validity of any assumptions about the comprehensiveness of the shiny list hinge).  

    Wed, 07/06/2011 - 13:10 | 1430179 Jim in MN
    Wed, 07/06/2011 - 14:00 | 1430367 sellstop
    sellstop's picture

    There is a small bank in the Pacific Northwest. Umpqua Bank. UMPQ. Looks like it is ripe for a breakout to the upside.

    Rumor has it that the dividend is about to be raised..

    I talked about it on my blog yesterday..


    Wed, 07/06/2011 - 14:02 | 1430375 The Onion Of Tw...
    The Onion Of Twickenham's picture

    The British Post Office has savings accounts that are popular with your grandma. All those accounts are run by Bank Of Ireland. Oops.

    Do NOT follow this link or you will be banned from the site!