EU bank stress test
- Thread starter atticus
- Start date
The European markets have had some big down days since last thursday. A rally was due.
European markets are forming a big ascending wedge on the daily charts. I'm favoring a breakdown, but we will probably see strength on Friday. Monday should be good to get short again. Taking any position into this weekend is dangerous.
Even if the results of the stress test are bad, they cannot come out and say it. Otherwise, everyone will pull their money out and we'll be worse of than before.
Deductive logic favors a 'no problems here' statement while they furiously work behind the scenes to correct whatever is really wrong.
European markets are forming a big ascending wedge on the daily charts. I'm favoring a breakdown, but we will probably see strength on Friday. Monday should be good to get short again. Taking any position into this weekend is dangerous.
Even if the results of the stress test are bad, they cannot come out and say it. Otherwise, everyone will pull their money out and we'll be worse of than before.
Deductive logic favors a 'no problems here' statement while they furiously work behind the scenes to correct whatever is really wrong.
Looks like you were right, atticus... They stress test only the trading books and don't look at what's held in accrual accounts. It's a jawk.
The Credit suisse preview nailed it few days ago
"We also regret that the stress test may not factor in potential losses on government bonds
in AFS and HTM portfolios, but only in trading portfolios. This is understandable in
accounting terms because losses are incurred on these only in the event of an actual
impairment rather than in the event of a movement in market value, but an option could
have been to market-to-market all portfolios under the assumptions that banks may be
forced sellers. Indeed Greek banksâ government bonds exposure is in HTM portfolios, thus
is unlikely to be impacted by the stress test. This is regrettable in our view, as this exposes
the test to criticism."
"We also regret that the stress test may not factor in potential losses on government bonds
in AFS and HTM portfolios, but only in trading portfolios. This is understandable in
accounting terms because losses are incurred on these only in the event of an actual
impairment rather than in the event of a movement in market value, but an option could
have been to market-to-market all portfolios under the assumptions that banks may be
forced sellers. Indeed Greek banksâ government bonds exposure is in HTM portfolios, thus
is unlikely to be impacted by the stress test. This is regrettable in our view, as this exposes
the test to criticism."
Yes, pretty much all the strategists predicted that they're gonna do this, but I held out hope that the Eurocrats "get it" this time arnd. Seems like it's disappointment time for me.
There will not be Q4 failures, if European banks have finally learned what the ECB has telling them for over 2 years : strenghten your damn balance sheet. Recapitalize. Over and over and over again.