European Bank Stress Test Results

The European Bank Stress Tests are in. These are the results from 91 EU banks, which are 65% of the sector.

The aggregate Tier 1 ratio, used as a common measure of banks’ resilience to shocks, under the adverse scenario would decrease from 10.3% in 2009 to 9.2% by the end of 2011 (compared to the regulatory minimum of 4% and to the threshold of 6% set up for this exercise). The aggregate results depend partly on the continued reliance on government support for currently 38 institutions in the exercise.

The aggregate Tier 1 ratio incorporates approximately 197bn € of government capital
support provided until 1 July 2010, which represents 1.2 percentage point of the
aggregate Tier 1 ratio.

As a result of the adverse scenario after a sovereign shock, 7 banks would see their
Tier 1 capital ratios fall below 6%.

The threshold of 6% is used as a benchmark solely for the purpose of this stress test
exercise. This threshold should by no means be interpreted as a regulatory minimum.
All banks that are supervised in the EU need to have at least a regulatory minimum of
4% Tier 1 capital.

The Wall Street Journal lists the banks who failed:

Spanish Bank Fails, here comes the IMF

Over the weekend a Spanish bank, Cajasur, was seized. This is a large Spanish bank with $23.9 billion or 0.6% of Spain's assets.

Now the IMF is gunning for Spain and it looks like they are after.....their pension system and wages. From the IMF press release:

A dysfunctional labor market, the deflating property bubble, a large fiscal deficit, heavy private sector and external indebtedness, anemic productivity growth, weak competitiveness, and a banking sector with pockets of weakness. Ambitious fiscal consolidation is underway, recently reinforced and front-loaded. This needs to be complemented with growth-enhancing structural reforms, building on the progress made on product markets and the housing sector, especially overhauling the labor market. A bold pension reform, along the lines proposed by the government, should be quickly adopted. Consolidation and reform of the banking system needs to be accelerated.

The EU is also calling for Spain to modify it's pension system by raising the retirement age and scaling the benefits. The IMF is zeroing in on Spain's labor markets. So why exactly are they doing this and why are workers supposed to be stuck with the housing bubble and derivatives bill as sovereign nations become mired in debt?

Analyst predicts break up of the Euro Zone

Talk about doomsday analysis, this has to be it. An analyst from Société Générale (French Bank) is concluding the Euro area is headed for a break-up:

Southern European countries are trapped in an overvalued currency and suffocated by low competitiveness, a situation that will lead to the break-up of the euro bloc, according to Societe Generale SA’s top-ranked strategist Albert Edwards.

Europe Commits $1.8 Trillion to Bail out Banks

Good God, where is my personal printing press.

EU Nations Commit 1.3 Trillion Euros to Bank Bailouts

France, Germany, Spain, the Netherlands and Austria committed 1.3 trillion euros ($1.8 trillion) to guarantee bank loans and take stakes in lenders, racing to prevent the collapse of the financial system

The greatest risk is in inertia - Sarkozy