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Stress Test 2 Results Are Out: 8 Banks Fail - 5 Spanish, 2 Greek, 1 Austrian

Tyler Durden's picture


The farce continues: Moody's predicted 26 failures, Eurostat gives us 8. EBA says 5 Spanish, 2 Greek, 1 Austrian Bank fail as of April 30; EBA says 7 Spanish, 2 German, 2 Greek, 2 Portuguese barely pass. EBA says 16 of 90 banks had core capital of 5% to 6% and will have to take action to improve capital buffers. EBA says EU banks average CT1 7.7% in adverse Scenario, as of April 30. Looking forward to next year's Stress Test. As expected, risk is broadly on in the EUR, as the "sell the farce" moment approaches. The reason why the bank rollover is so urgently pushed is because two
thirds of all Greek debt is held by Greek banks who then pledge it back
to the ECB at par. Specifically, 67% of Greek debt is held by Greek
banks, 9% by German banks, and 8% by French banks. Then these same Greek
banks that "roll" their Greek sovereign debt receive even more cash
handouts from the Greek central Bank, which in turn is funded from the
ECB. Biggest Ponzi clusterfuck ever.

The banks that have failed are Spanish: Unnim, CAM, Catalunyacaixa, Banco Pastor, Caja3, Greek: Eurobank, Atebank, and Austrian: Volksbanken.

The reason why the bank rollover is so urgently pushed is because two thirds of all Greek debt is held by Greek banks who then pledge it back to the ECB at par. Specifically, 67% of Greek debt is held by Greek banks, 9% by German banks, and 8% by French banks. Then these same Greek banks that "roll" their Greek sovereign debt receive even more cash handouts from the Greek central Bank, which in turn is funded from the ECB, while at the same time providing collateral to the standalone banks. Biggest Ponzi clusterfuck ever.

Among the funniest news is that the total capital deficiency is just $3.5 billion:

Eight banks failed the European Union stress tests after regulators said they had a combined capital shortfall of 2.5 billion euros ($3.5 billion).

The banks were found to have insufficient reserves to maintain a core tier 1 capital ratio of 5 percent in the event of an economic slowdown, the European Banking Authority said.

The assessments are the first by the European Banking Authority since it was set up earlier this year. Last year’s tests by its predecessor were criticized for not being tough enough because banks were shown to need only 3.5 billion euros more capital, a 10th of the lowest analyst estimate. Banks that fail the stress test must present a plan to raise more capital within three months.

“Any institution failing the stress test could be left facing funding challenges, the potential loss of stakeholder confidence and the risk of a credit-rating downgrade,” Steve Pearson, a partner at PricewaterhouseCoopers LLP, said in a note to clients. “Experience has shown the premium the riskier institutions might have to pay to retain some of their depositors could increase to an unsustainable level.”

Here is the joke of an assumption in sovereign bond valuation haircuts in the Adverse scenario which was not used. Greece peaks at 29.5%: its CTD bonds already trade with a 50% discount. Tragic.

Full release:

Press Release

And the summary report:

Summary Report


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Fri, 07/15/2011 - 12:04 | 1459777 TradingJoe
TradingJoe's picture

...and the algos go crazy :))

Fri, 07/15/2011 - 14:46 | 1460397 Highrev
Highrev's picture

Nothing like old news, and old bad news to boot.

Let's try again.

How about scratching, as in below the surface?

Something like the ONE Spanish bank (the other four were low end "Cajas") that didn't make it because some convertible bonds weren't included in the analysis (which means that ONE Spanish bank really passed . . .).

Or how about the fact that 95% of the Spanish banking system was examined, while in Germany that figure was around 60% (ahem, which means that 40% of the German financial is a big fat N/A).

Or how about . . .

There's a shitload of real news out there if you bother to get off your ass (that's not directed just to ZH, rather it goes to all you oh-so-well informed readers - how in the hell do you make investment decisions with the horrible information you have, I'll never know - and the the rest of the U.S. bloggers/media/general populace/etc. How can you settle for such superficial crap?

Fri, 07/15/2011 - 19:25 | 1461195 fxrxexexdxoxmx
fxrxexexdxoxmx's picture

What is the ratio of Banks to Cajas? Are Cajas backed stopped by the banks?

Fri, 07/15/2011 - 12:05 | 1459779 bigwavedave
bigwavedave's picture

hooray! viva le banque! lez bitchez

Fri, 07/15/2011 - 12:05 | 1459780 equity_momo
equity_momo's picture



how tense.

Fri, 07/15/2011 - 12:06 | 1459786 Hondo
Hondo's picture

These guys just can't stop lying.  No one except the robots, and even they are having doubts, believe a word they say.....

Fri, 07/15/2011 - 12:47 | 1459978 carbonmutant
carbonmutant's picture

Landesbank Hessen-Thueringen, known as Helaba, refused to allow the EBA to release its stress-test data

The European Union plans to force banks to disclose how they fare in future stress tests to prevent any repeat of the last-minute withdrawal of Germany’s Landesbank Hessen-Thueringen from this year’s exams.

Fri, 07/15/2011 - 12:07 | 1459793 firstdivision
firstdivision's picture

Lulz!  Not one single Italian bank.  This thing is so freaking hilarious that I would be laughing if it wasn't so terrible executed.  For the countries they listed, one must remember to apply the times 2 rule to actually give the results some credibility.

Fri, 07/15/2011 - 12:10 | 1459812 Ghordius
Ghordius's picture

Credibility? You can't trade credibility, therefore credibility is irrelevant.
Now, if you would offer complex options on it, then you could....

Fri, 07/15/2011 - 12:38 | 1459945 Greater Fool
Greater Fool's picture

A whole new interpretation for the BS PDE!

Fri, 07/15/2011 - 13:15 | 1460084 Mactheknife
Mactheknife's picture

If you havn't seen this yet...sums it up in 2.5 min...and it's a riot!

Fri, 07/15/2011 - 14:49 | 1460404 Highrev
Highrev's picture

Or maybe the credibility problem belongs to the loser U.S. rating agencies and those who pay attention to them?

Get with it people. You're on a sinking ship, and its name isn't Europe.

Fri, 07/15/2011 - 12:07 | 1459795 Quintus
Quintus's picture

The Euro politicians are sticking faithfully to Goebbels' dictum about telling a lie big enough and repeating it often enough.  They seem remarkably unaware that the vast gulf between reality and the picture they are trying to paint is plainly visible to all, and they are just making themselves look ridiculous.

Fri, 07/15/2011 - 12:08 | 1459802 oogs66
oogs66's picture

good one

Fri, 07/15/2011 - 12:08 | 1459796 Ghordius
Ghordius's picture

Hate me if you want, I still say that the Bank Bailout Age in Europe is over.

The risk is not on the EUR, it's on the banks. Yes, this means bank runs in the EU, eventually...

Fri, 07/15/2011 - 12:14 | 1459828 equity_momo
equity_momo's picture

G , you are not wrong. But dont limit the bank runs to EZ.  Youre going to see GLOBAL , yes GLOBAL panic on deposits.  Those who dont panic in time will find out just what happens to depositors in a ponzi scheme.  Once the capital controls go into full retard mode it will be too late to get onto a lifeboat.

Fri, 07/15/2011 - 12:09 | 1459805 TradingJoe
TradingJoe's picture

"They" would never let ANY "Important" bank fail! No! Never! Hehehhe:))))))))

Fri, 07/15/2011 - 12:09 | 1459808 Sofa King
Sofa King's picture

...imagine if us poor, broke US taxpayers didn't flood the Eurotrash Bins, I mean banks with 850 Billion Dollars.

Fri, 07/15/2011 - 12:15 | 1459836 Ghordius
Ghordius's picture this the moment to beg you to give us Timmy and the Bernank?

Please send them over on this side of the pond, pretty please...?

Fri, 07/15/2011 - 12:29 | 1459898 Ghordius
Ghordius's picture

...wait, my medication is not working anymore.

Here's the deal: keep them and we will send you a 850 quadrillions USD in ten years.

Fri, 07/15/2011 - 12:31 | 1459903 Sofa King
Sofa King's picture

Yea, get back on that medication of yours.

Fri, 07/15/2011 - 12:09 | 1459809 ZeroPower
ZeroPower's picture

Fx in the EUR - selling the news

Fri, 07/15/2011 - 12:10 | 1459813 Mongo
Mongo's picture

The farce is strong with this one...

Fri, 07/15/2011 - 12:10 | 1459816 TaxSlave
TaxSlave's picture

What a beautiful outfit the Emporer has!!

Fri, 07/15/2011 - 12:27 | 1459888 Larry Darrell
Larry Darrell's picture

He was born with it.

Fri, 07/15/2011 - 12:11 | 1459821 Atomizer
Atomizer's picture


IMF Note on Global Economic Prospects and Policy Challenges.

  • The risks of not resolving the Greek crisis are severe. A greater sense of urgency is needed to address the crisis and reduce the risks of contagion.
  • Progress on financial sector repair and reform has been too slow, and policy initiatives are urgently needed to make financial systems resilient to new systemic shocks.
  • Advanced G-20 economies need to put in place credible medium-term fiscal consolidation that balances short-run growth fragility with fiscal sustainability. Monetary policy should support fiscal adjustment and stay accommodative where there is economic slack.
  • In emerging G-20 economies, more rapid macroeconomic policy tightening and demand rebalancing is needed in some cases. Pragmatic use of macroprudential tools may be needed to manage large capital inflows.


    Fri, 07/15/2011 - 12:13 | 1459822 YesWeKahn
    YesWeKahn's picture

    If this is not stressful, why call it a stress test?

    Lets call it comfort test.

    Fri, 07/15/2011 - 12:12 | 1459823 firstdivision
    firstdivision's picture

    Well that was easy to show the problem, per the report above

    The scenario includes a sovereign stress,with haircuts applied to sovereign and bank exposures


    Since when did anyone have to take a haircut?

    Fri, 07/15/2011 - 12:14 | 1459831 gwar5
    gwar5's picture

    Reggie Middleton's suggestion that these stress tests will prime the Old World for a first ever pan-Euro bank run may be correct. A slow motion bank run is happening anyway.

    Fri, 07/15/2011 - 12:16 | 1459838 Marge N. Callz
    Marge N. Callz's picture

    It's all candy canes and rainbows. Time to saddle up the unicorn and ride the wave of euphoria.

    Fri, 07/15/2011 - 13:00 | 1460029 Almost Solvent
    Almost Solvent's picture

    Nice username.

    Hugh Jazz
    Mike Hunt
    Mike Hock
    Anita Blochob
    Iwe Toddid

    Fri, 07/15/2011 - 13:19 | 1460100 SamuelMaverick
    SamuelMaverick's picture

    Don't forget the sunshine, flowers, sparkling spring water , and the girls dancing in the grassy fields with a soft gentle breeze blowing up their skirts. I cant believe that the shit is hitting the fan all at the exact same time in Europe and in the US.

    Fri, 07/15/2011 - 12:24 | 1459870 Dick Darlington
    Fri, 07/15/2011 - 12:16 | 1459841 carbonmutant
    carbonmutant's picture

    Fortunately the tests takers didn't account for what might happen if  Greece  or another Euro-zone country defaults on its debts.

    Fri, 07/15/2011 - 12:17 | 1459843 RobotTrader
    RobotTrader's picture

    Why aren't European stocks lock limit down?

    Fri, 07/15/2011 - 12:19 | 1459853 Quintus
    Quintus's picture

    Because it's Friday evening and the exchanges are all closed?

    Fri, 07/15/2011 - 12:24 | 1459869 Ghordius
    Ghordius's picture

    News that could "distort" the markets in Europe are usually given after the exchanges are closed.

    Fri, 07/15/2011 - 12:25 | 1459877 Quintus
    Quintus's picture


    Fri, 07/15/2011 - 12:19 | 1459854 carbonmutant
    carbonmutant's picture

    Mild Cognitive Impairment...

    Fri, 07/15/2011 - 12:22 | 1459862 The Axe
    The Axe's picture

    ALL the irish banks passed the first stress test....joke...Robot....please....get a fucking grip....Not one bank in Portugal fucking kidding me....

    Fri, 07/15/2011 - 12:22 | 1459864 The Axe
    The Axe's picture

    ALL the irish banks passed the first stress test....joke...Robot....please....get a fucking grip....Not one bank in Portugal fucking kidding me....

    Fri, 07/15/2011 - 12:25 | 1459881 equity_momo
    equity_momo's picture

    Because youre short?

    Fri, 07/15/2011 - 12:29 | 1459899 SheepDog-One
    SheepDog-One's picture


    Fri, 07/15/2011 - 12:18 | 1459851 Dr. Engali
    Dr. Engali's picture

    I don't need a test to tell me I'm under stress.

    Fri, 07/15/2011 - 12:22 | 1459860 LaLiLuLeLo
    LaLiLuLeLo's picture

    rating absolute shit AAA. Now that's credibilty

    Fri, 07/15/2011 - 12:22 | 1459861 equity_momo
    equity_momo's picture

    So hands up  who wants to buy into the 2.5bil Euro of rights issues coming out of BK EZ banks?  How tempting!

    Fri, 07/15/2011 - 12:25 | 1459874 lieutenantjohnchard
    lieutenantjohnchard's picture

    indeed, the stress tests are farce. glad i ramped up with bullion purchases of silver and gold on the pull back and retrace. helps sleep easier at night.

    Fri, 07/15/2011 - 12:27 | 1459890 carbonmutant
    carbonmutant's picture

    So much for the stress test rally.

    Fri, 07/15/2011 - 12:30 | 1459894 speconomist
    speconomist's picture

    Unnim, Caja3, Banco Pastor, CatalunyaCaixa and CAM (yes, as in cam) were the Spanish banks and saving banks which failed the stress tests.


    Edit: Seems that Tyler edited the post already with all the info.

    Fri, 07/15/2011 - 12:32 | 1459910 RobotTrader
    RobotTrader's picture

    I'm still baffled why BBVA and STD are not limit down today.

    Yet they still have dividend yields of 9% - 11%, and no announcement of a dividend cut yet.

    Fri, 07/15/2011 - 12:36 | 1459935 speconomist
    speconomist's picture

    Simply because their activity is not 100% focused in Spain, in fact Santander is highly exposed to emerging countries such as Brazil, and even in the only country which didn't fall into recession in 2008-2010 in Europe: Poland.

    Fri, 07/15/2011 - 14:48 | 1460401 russwinter
    russwinter's picture

    The Brazil miracle is in general is tied in as a supplier to the China economic story.  The saving grace so far has been elevated commodity prices, but that hasn’t staved off one the biggest consumer bubbles in the emerging markets. This article covers the basics,  consumer debt service in Brazil has exploded to 28% of disposable income (compared to 16% in the US) , and delinquencies are spiking as well, from 7.8% at the end of 2010, to 9.1% in May. This one will blow up fast at the first blush of a commodity downturn.

    Fri, 07/15/2011 - 14:29 | 1460342 ebworthen
    ebworthen's picture

    They are propped up by taxpayer money and the IMF; markets broken.

    Fri, 07/15/2011 - 12:34 | 1459920 RobotTrader
    RobotTrader's picture

    BAC from $15 to $10 in a few months yet XRT has rallied from $15 to $54 the last few years with no weakness whatsoever?

    Fri, 07/15/2011 - 12:37 | 1459939 SheepDog-One
    SheepDog-One's picture

    You're 'baffled' by it all? Quit sounding like a retard and maybe get more respect around ZH.

    Fri, 07/15/2011 - 12:36 | 1459931 SilverDoctors
    SilverDoctors's picture

    As Sinclair would say:  MOPE

    Fri, 07/15/2011 - 12:36 | 1459936 Everybodys All ...
    Everybodys All American's picture

    No Irish banks?  Maybe they don't call them banks. What do they call a bank when the country takes them over?

    Fri, 07/15/2011 - 12:38 | 1459941 SheepDog-One
    SheepDog-One's picture


    Fri, 07/15/2011 - 12:39 | 1459946 GFORCE
    GFORCE's picture

    The Ministry of Truth couldn't say anything negative here.

    Fri, 07/15/2011 - 12:40 | 1459950 SAME AS IT EVER WAS
    SAME AS IT EVER WAS's picture

    I knew I should have bought ire @.85 yesterday. Very nice algo work going on with that one. What a total POS!

    Fri, 07/15/2011 - 12:40 | 1459952 wisefool
    wisefool's picture

    Liesman on CNBC was trying to get the top "porter" position emptying the bedpans on the Bernakocopter.

    He may not be following ZH. I doubt the current bernakocopter is trans-ocean capable after the newly released spy footage released by WB7.

    In other news. The teleprompter in cheif announced earlier today that he might not watch Fox News on Cable, but he supports their ability to receive transfer payments from Americans who did not get an LLM Tax degree. Keep sending those kids to college folks!

    Fri, 07/15/2011 - 12:43 | 1459963 johny2
    johny2's picture

    reminder: market is rigged. buy physical PM and sleep well.

    Fri, 07/15/2011 - 12:44 | 1459967 carbonmutant
    carbonmutant's picture

    Eurobank EFG fails stress test....

    Fri, 07/15/2011 - 12:48 | 1459983 blunderdog
    blunderdog's picture

    Them Euros don't know how to properly design a stress test, obviously.  The entire objective is to make sure no one fails. 


    Fri, 07/15/2011 - 12:49 | 1459989 SheepDog-One
    SheepDog-One's picture

    So if Moody's had chalked up 26 banks to fail and only 8 'really did', I guess now Moodys goes on a downgrading rampage?

    Fri, 07/15/2011 - 12:51 | 1459993 lieutenantjohnchard
    lieutenantjohnchard's picture

    sure glad i don't have to sweat out the weekend with std, et al in my portfolio.

    Fri, 07/15/2011 - 12:54 | 1460007 anyways
    anyways's picture

    what a joke. The "Euro" is a piece of crap. Expect this "currency" to fall like a stone.

    Fri, 07/15/2011 - 13:00 | 1460030 Piranhanoia
    Piranhanoia's picture

    Wow, so poor they couldn't even raise bribe money to the rater like their fellows?  Must hae been a huge payoff to get that doubleplusgood rated "probably won't fail today" 

    Fri, 07/15/2011 - 13:05 | 1460039 Double down
    Double down's picture

    The more of these tests they put out the less credibility they get even if they raise standards of the tests.

    What is really getting tested here are people's credibility not the banks. 

    Fri, 07/15/2011 - 13:09 | 1460047 RobotTrader
    RobotTrader's picture

    I'm wondering if anyone in Europe has been buying LULU outfits and iPads?  Both stocks seem bulletproof during the worst recession and banking crisis in decades.

    I bet lots of guys are hiding out in these stocks and have outsized positions.

    One day the party will be over, but when?

    Fri, 07/15/2011 - 13:11 | 1460059 Silverhog
    Silverhog's picture

    Barely passable is not where you want to be with a contracting economy. I say add them to the failed list with an asterik saying "Coming Soon"

    Fri, 07/15/2011 - 13:15 | 1460077 treemagnet
    treemagnet's picture

    How are they gonna keep moving the goal post when theres more than one ball in the air?

    Fri, 07/15/2011 - 13:27 | 1460123 PulauHantu29
    PulauHantu29's picture


    are these "hard' failures....or "soft" failures?

    Fri, 07/15/2011 - 13:29 | 1460128 midnight
    midnight's picture

    Of course. For ZH, a shitty rating agency that is still giving AAA to U.S. is more credible than whatever comes from Europe (that you admited you don't have a clue about).



    Fri, 07/15/2011 - 14:23 | 1460315 tim73
    tim73's picture

    It is one of the commandments of being American. If USA is crap, every other nation must be crappier or they cheated!

    Fri, 07/15/2011 - 14:42 | 1460347 YHC-FTSE
    YHC-FTSE's picture

    Bravo, re: US AAA.


    It's both worse and better than I thought. Only 8 banks out of 90 failed (One German bank, Helaba withdrew from the test), but 16 are in the danger zone criteria, and it's not as if 5% CT1 is an impossible target! Total makes 25, which oddly enough is almost exactly what Moody's predicted. Smells like my girlfriend after a few days without showering. Distinctly fishy.


    Only 30 banks have assessments twice a year, and although most have expressed bolstering funds, one has to wonder where it's going to come from? The 8 banks have to find 2.5Bn €  within 5 months, and there's fat chance that all 90 banks will undergo the stress test again any time soon.

    Edit: Missed the failed banks list the first time in the article, but I see it now.

    Fri, 07/15/2011 - 13:32 | 1460147 lieutenantjohnchard
    lieutenantjohnchard's picture

    it seems unreasonable to me to fight the tide of insolvency vis-a-vis the banks. it seems to me a rationale investor would simply take the high road and buy physical silver and gold bullion rather than risk one's wealth with the likes of bank stocks, which if the worst turns out accurate could be bought for pennies on the dollar down the road.

    Fri, 07/15/2011 - 13:42 | 1460177 YesWeKahn
    YesWeKahn's picture

    Do you really believe what a prostitute would tell you?

    Fri, 07/15/2011 - 13:52 | 1460211 doomandbloom
    doomandbloom's picture

    the captial requirement calculations are a joke..there are so many conditions/exceptions in there the the ultimate % is on a very small number.


    Banks however make a big noise about it to show how difficult it is for them to maintain this number, while in fact it is not that big.


    This is just to fool the public.

    Fri, 07/15/2011 - 14:04 | 1460259 PaddyFields
    PaddyFields's picture

    This is patently wildly optimistic nonsense.

    The Irish Banking system is in a coma and being held on life support by the ECB, yet it has just been given the ok to run a marathon if it takes on plenty of fluids. How does that work?


    Fri, 07/15/2011 - 14:26 | 1460311 ebworthen
    ebworthen's picture


    Oh no! 


    We need more working middle class assets and fast!


    Increase fees!

    Raise taxes!

    More robosigning!

    The banking elite and politicians must be saved!

    (We're doing it for the children, really).


    Fri, 07/15/2011 - 15:15 | 1460484 Problem Is
    Problem Is's picture

    Didn't we learn years ago from Wanker Timmay that all stress tests of Banksters are bullshit?

    Fri, 07/15/2011 - 16:56 | 1460915 Highrev
    Highrev's picture

    The assumptions are there for everyone to see. In that sense of course, they are bullshit. What's important are the declared balance sheets of those who participate (key words: those who participate). Then the assumptions are there to plot a plausible scenario, as can be done with any company, or economy for that matter. Again what's important is the declared financial condition to begin with. And that ain't bullshit.

    Fri, 07/15/2011 - 19:22 | 1461185 Buck Johnson
    Buck Johnson's picture

    A joke, a joke big time.

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