The Committee of European Banking Supervisors is reporting that seven of 91 banks tested have failed the European stress tests. The totals reflect five Spanish regional banks, Germany’s Hypo and Greece’s ATE Bank. The rough consensus was that 10 banks would fail the tests. The question now is if the methodology was difficult enough or credible enough.

The euro is relatively unchanged from where it was trading before the results. EUR/USD is down 35 pips to 1.2847. There was a brief spike higher and lower but it no searching for direction.

The total capital shortfall is €3.5B which is far short of the €30-80 billion expected. Either the results are much better than expectations or the tests were not nearly harsh enough.
 

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