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Errors Found In The ECB's "Confidence-Boosting" Stress Test

Tyler Durden's picture




 

Just when you thought the humor out of the central bank that just released a stress test whose adverse scenario did not even assume the most likely Eurozone outcome, i.e., deflation, couldn't get any better, moments ago we learned that the test, which was supposed to restore confidence in Europe's banking system and in the oversight and regulatory abilities of Europe's central bank, had "errors and inconsistencies" which forced the ECB to "briefly remove from its website" the results of Italy's most insolvent bank, Monte Paschi, "after discovering an error in its key capital ratio", a bank which based on the ECB's (faulty?) failure assessment was halted countless times earlier today after crashing so hard the regulator had to ban selling it short. Again.

The WSJ tries to put some lipstick on this latest Snafu by the former Goldmanite in charge of Europe's money printer :

While the tests have been going on since last year, European officials were scrambling until the last minute to finalize the data. On Sunday morning, barely an hour before the results were due to be released, the EBA official in charge of the stress-test process was still scrambling to rubber stamp the numbers, causing him to show up 10 minutes late to a briefing with journalists.

 

Shortly after the results were published, ECB officials detected an error in the 2013 capital ratio of Monte dei Paschi, Italy’s third-largest bank, according to a person familiar with the matter. The error, on the first page of a template posted on the ECB website, was important because Monte dei Paschi was the worst performer in the stress tests and therefore was at the center of investor attention Sunday.

 

After discovering the error, ECB officials briefly removed Monte dei Paschi’s files from its website, according to the person familiar with the matter, who described the problem as an isolated “data-processing error.” The corrected files were republished a short time later. But their temporary removal drew the attention of investors, some of whom privately expressed frustration that the ECB had altered the figures without explaining what had changed.

Then there is Deutsche Bank, the bank best known for losing not one but two internal legal advisors in the past year to suicide. Actually, and somewhat ironically, the DB "error" is related to precisely that:

Deutsche Bank, facing a wide range of lawsuits and government investigations, has been a focal point of such concerns, and so its litigation-expense figure was being closely watched.

 

The EBA pegged Deutsche Bank’s litigation costs for the nine months of 2014 at €470 million, which was the figure Deutsche Bank reported for the first six months of the year. The ECB’s figure was nearly triple that, at about €1.4 billion.

 

The reasons for the discrepancy, which didn’t affect Deutsche Bank’s capital ratio, aren’t clear.

 

An ECB spokeswoman said it used data covering Deutsche Bank’s litigation expenses for the first nine months of the year, adding the data was provided by banks to the national supervisors. An EBA spokeswoman said the agency used data that was provided to it by the ECB. A Deutsche Bank spokesman declined to comment.

It gets better:

Results of a review of Polish banks’ balance sheets were left out of the tests due to the late submission of data. And the ECB and the European Banking Authority, which were jointly overseeing the testing process, came up with drastically different figures for an important Deutsche Bank AG data point.

 

But don't lose faith, or confidence, in Europe's confidence building exercise, here's why: "The issues appear to be isolated and, unlike in previous iterations of the European stress tests, don’t call into question the overall credibility of the exercise, according to analysts and other experts. They said some mistakes are inevitable when compiling over a million pieces of data."

Said otherwise, "mistakes will happen", after all it is a central bank, and the next mistake could well be its last (see Lehman circa 2008).

And now, with all their confidence in the central bank's ability to spin errors restored, unemployed, albeit living in a socialist paradise, Europeans can go back to not asking for loans from a banking industry which, as the ECB quietly reported without errors this time, has now over $1.1 trillion in bad loans. Which, remember, is bullish: the greater the risk of catastrophic, systemic failure, the greater the probability the ECB will have no choice but to make Eurorain.

 

 

Finally, for those who actually care, below is a visualization of the ECB's GIGO results, which judging by today's European action, nobody believes in any more.

 

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Mon, 10/27/2014 - 15:58 | 5383528 NoDebt
NoDebt's picture

I am TOTALLY buying that money gun.

Thanks, Tylers.

Mon, 10/27/2014 - 16:06 | 5383548 Pladizow
Pladizow's picture

Any body know of an easy way for retail to short europen sovereign debt?

Mon, 10/27/2014 - 18:29 | 5384014 knukles
knukles's picture

Long Live Banco Monte Pistachio!

Tue, 10/28/2014 - 05:07 | 5385195 DavidC
DavidC's picture

Thanks Knukles, that made me smile!

DavidC

Mon, 10/27/2014 - 18:29 | 5384017 falak pema
falak pema's picture

Ask Einhorn he wants to short France and go long Greece! 

Mon, 10/27/2014 - 16:56 | 5383694 Ghordius
Ghordius's picture

there is a problem with it's ammo, though

Mon, 10/27/2014 - 22:52 | 5384790 cornedmutton
cornedmutton's picture

Yeah, a dollar a shot is too rich for my blood.

Mon, 10/27/2014 - 16:00 | 5383529 Haus-Targaryen
Haus-Targaryen's picture

So the EMZ sucks and is held together for nonsensical political purposes.  What else is new? 

If you zoom in all the way on the German dot -- its lies directly on top of a Sparkasse -- which is a horribly bankrupt and insolvant financial institution.  

Mon, 10/27/2014 - 17:00 | 5383704 Ghordius
Ghordius's picture

perhaps, or perhaps not, the political reasons might be silly. they often are. but there are sound reason for monetary alliances during Currency Wars

look at Russia. look at Turkey. look at a third of the world

Mon, 10/27/2014 - 17:23 | 5383781 SAT 800
SAT 800's picture

You're crazy. The Euro was an effort by two Socialists to avoid the serial embarrassment of devaluations vis a vis the German Mark. Read the book; "the tragedy of the Euro".

Mon, 10/27/2014 - 17:30 | 5383809 SAT 800
SAT 800's picture

Look at the whole world; what's a currency war? what does it mean? how did it come about? what fucking good is it going to do to have a one size fits all currency that fits nobody in Europe; during or not during a currency war. See if you can answer these questions.

Tue, 10/28/2014 - 04:29 | 5385179 Ghordius
Ghordius's picture

I have answers to those question, but are you even interested? How did this part of the current currency war start? By China buying up two trillions USTs

my question is if you are aware of how currency wars looked like in Europe when we all had the medium-sized currencies without currency grids

I can tell you one thing: banksters loved that environment. entrepreneurs like me... hated it

tell me, why does the US not have 12 different currencies? or, alternatively, wasn't gold (and/or silver) from time to time the original global common currency?

Mon, 10/27/2014 - 17:27 | 5383797 SAT 800
SAT 800's picture

The Austrian Dot is a very serious problem, also. they had the bright idea of capitalizing the newly freed economies of Eastern Europe after the Soviet Era; and most of them are doing very, very badly. I would suppose if this bank actually marked its assets to market it'd be about 300% insolvent. And nobody knows how this can be worked out.

Mon, 10/27/2014 - 16:01 | 5383531 Cognitive Dissonance
Cognitive Dissonance's picture

The original (and only) error is in assuming there is any validity at all to this so-called 'stress' test.

Mon, 10/27/2014 - 16:43 | 5383646 KnuckleDragger-X
KnuckleDragger-X's picture

And I suppose you don't believe in the tooth fairy either......

Mon, 10/27/2014 - 18:30 | 5384023 knukles
knukles's picture

Take away his Pixie Dust

Mon, 10/27/2014 - 19:38 | 5384198 insanelysane
insanelysane's picture

The numbers are made up but they still need to have some relation to reality because these banks are public and there is some actual information floating around.  In order to keep the ponzi going the authorities will need to nationalize the banks so their information can be hidden.

Mon, 10/27/2014 - 19:51 | 5384252 knukles
knukles's picture

Now that's a thought.  For all intents and purposes, the bank's losses have been nationalized.  So, the politicians could begin to look at vig and usury as tax revenue. 
Very creative!

Mon, 10/27/2014 - 16:00 | 5383535 SheepDog-One
SheepDog-One's picture

I feel connedfident about the ECB!

Mon, 10/27/2014 - 16:01 | 5383538 Rainman
Rainman's picture

 Okay.. they lie and nobody believes them , so now what.....? Supremely bullish is what  ! 

Mon, 10/27/2014 - 16:09 | 5383549 IANAE
IANAE's picture

data quality issues... huh.

funny in particular given the AQR was (at least in part) intended to ensure good info as the handoff to ECB (as regulator) transpired...

Mon, 10/27/2014 - 16:49 | 5383664 Al Huxley
Al Huxley's picture

Nobody believes any of this shit, but nobody cares either.  We've transitioned permanently into fantasyland - riskless wealth accumulation based on fraud, ponzinomics, lying and outright theft for the few, declining standard of living and increasing hopelessness for the many.  Pretending there's any legitimacy to the system at all just gives it more credit than is due.

Mon, 10/27/2014 - 16:53 | 5383680 Ghordius
Ghordius's picture

"Which, remember, is bullish: the greater the risk of catastrophic, systemic failure, the greater the probability the ECB will have no choice but to make Eurorain."

The Logic Of The US Stock Market (megabank perspective included):

Crisis, MoneyRain, Bullish

Broken Windows, MoneyRain, Bullish

Invasion From Mars, MoneyRain, Bullish

Have your rain somewhere else, thank you very much

Mon, 10/27/2014 - 17:09 | 5383742 Herdee
Herdee's picture

The end game for the FED's ponzi scheme is to get rid of paper money.The first one to do it in Europe will be Sweden.When everything goes completely electronic and they outlaw gold and confiscate it,their excuse will be to get rid of organized crime and have everybody paying their fair share of taxes.That way,the government has complete control over you.No paper money,your job is guaranteed and controlled and so is your health care.They'll know electronically what you even wipe your ass with.You are now a state fascist member.Welcome to the machine.(Pink Floyd)

http://www.silverdoctors.com/prepare-for-global-gold-confiscation-and-or...

http://www.youtube.com/watch?v=9qEsTCTuajE

Mon, 10/27/2014 - 17:25 | 5383787 WTFUD
WTFUD's picture

How much are these faux stress tests costing Joe Public? Wha' ya all mean Fuck JP. No Fuck you EUUUU. Fuck me!
There's a thousand PhD's including Maffmantitions doing SUMS for Mad Mario, so how come it's all BS?
Bring back Timmy Geithner, non dis shit would 'appn on 'is watch.
Fuck-Off. Me Fuck off. Yeah you. OK.

Mon, 10/27/2014 - 17:52 | 5383897 Aleedsfella
Aleedsfella's picture

After the last stress test banks needed bailing out?

Mon, 10/27/2014 - 19:16 | 5384153 Sick
Sick's picture

Liars figure...figures lie...

Tue, 10/28/2014 - 13:04 | 5384776 TheGreatRecovery
TheGreatRecovery's picture

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