Monday, September 06, 2010

How Not To Restore Confidence "Stress Test Edition"......

The main goal from "stress testing" the banks was to provide at least some confidence....There is now a good chance that this "PR Stunt" could backfire faster than even i predicted .....I´m not surprised that the rules for transparency were not "rigoros".... No wonder Only 35% Of Survey Participants Expect The Stess Test To Be Credible.... ...

Wenn man bedenkt das die einzige Aufgabe des Stress Test gewesen ist zumindest ein Mindestmaß an Vertrauen wiederherzustellen muß man so langsam befürchten das selbst dieses Mindestziel in Rekordzeit verfehlt wird..... Ich persönlich wundere mich nicht das die "Transparenzanforderungen" in Sachen Stress Test nicht "brutalst möglich" angesetzt worden sind......Kein Wunder das bereits bei Durchführung lediglich 35% der Befragten dem Stress Test "Glaubwürdigkeit" zugestanden haben....


Europe's Bank Stress Tests Minimized Debt Risk WSJ

Europe's recent "stress tests" of the strength of major banks understated some lenders' holdings of potentially risky government debt, a Wall Street Journal analysis shows.

As part of the tests, 91 of Europe's largest banks were required to reveal how much government debt from European countries they held on their balance sheets. Regulators said the figures showed banks' total holdings of that debt as of March 31.

An examination of the banks' disclosures indicates that some banks didn't provide as comprehensive a picture of their government-debt holdings as regulators claimed.

Some banks excluded certain bonds, and many reduced the sums to account for "short" positions they held—facts that neither regulators nor most banks disclosed when the test results were published in late July.

Because of the limited nature of most banks' disclosures, it is impossible to gauge the number of banks that excluded portions of their sovereign portfolios from their disclosures, or the overall effect of that practice.

But the exposure to government debt of at least some banks, such as Barclays PLC and Crédit Agricole SA, was reduced by a significant amount, according to industry officials and financial filings made by the banks. Adding to the haziness, the stress tests' reported sovereign-debt levels differed, sometimes widely, from other international tallies and from some banks' own financial statements.

The stress tests' upbeat results—only seven banks flunked, and were deemed short of just €3.5 billion ($4.51 billion) of capital—initially soothed markets. But fears have flared up again as heavily indebted countries like Ireland and Greece continue to struggle. Among other warning signs, the costs of insuring many bank and government bonds against default in countries such as Portugal, Ireland, Greece and Italy have jumped above their pre-stress-test levels.

The banks based their stress-test disclosures on a template provided by CEBS. The template asked for banks to disclose their "gross" and "net" exposures to sovereign risk in each E.U. country. Most banks' disclosures didn't define "gross" and "net" beyond saying that the latter were "net of collateral held and hedges."

But some banks' figures didn't represent their total holdings. Barclays, for example, excluded some government bonds it was holding for trading purposes. The rationale, according to Barclays officials, was that the bonds were directly related to transactions the big U.K. bank was performing for corporate or government clients, and that the holdings vary widely from day to day. Barclays didn't disclose that it wasn't listing its full holdings.

Excluding the bonds reduced Barclays' portfolio of Italian sovereign debt—which the bank said was £787 million ($1.22 billion)—by about £4.7 billion, Barclays officials said. The bank's holdings of Spanish government bonds, listed at £4.4 billion, shrank by about £1.6 billion.

The Barclays officials said they believe other big European banks also excluded significant slices of their trading portfolios from stress-test disclosures.

In its midyear results last month, Barclays reported its sovereign-bond portfolios based on a broader definition than the stress tests used. As a result, Barclays' reported holdings of debt issued by the Italian, Spanish and Irish governments swelled.

BIS data from March 31 indicates that French banks were holding about €20 billion of Greek sovereign debt and €35 billion of Spanish sovereign debt. In the stress tests, four French banks, which represent nearly 80% of the assets in France's banking system, reported holding a total of €11.6 billion of Greek government debt and €6.6 billion of Spanish debt.

Keep in mind that the even the most adverse scenario of the Stress Test didn´t include any hair cut on sovereign debt....Too bad that only 6 weeks later the market is already pricing in a restructuring of Greek Debt ( Greek Debt Crisis – Apocalypse Later )

Man sollte villeicht nocheinmal gesondert darauf hinweisen das selbst im schlimmsten anzunehmen Fall der "Strees Test" keinerlei Abschlag bei Staatsanleihen vorsieht....Dumm nur, das bereits 6 Woche nach Durchführung der Markt bereits zum Teil massive Abschläge eingepreist hat ( siehe Greek Debt Crisis – Apocalypse Later )

EU Rehn: Other 14 EMU Members To Cover Slovakia Greece Loans

The other 14 Eurozone countries will cover Slovakia's share of the E110 billion loan package to Greece after the country refused to participate, European Commissioner for Economic and Monetary Affairs, Olli Rehn said on Tuesday.

Slovakia originally agreed to participate in the E110 billion aid package for debt-laden Greece, but a new Slovak government decided to withdraw that commitment
Domino #2, Ireland, Set To Topple? ZH

The Irish-Bund spread is going nuts on reports that the ECB is bidding up sovereign debt once again, together with a WSJ report that the Stress Test was, as everyone with half a brain knew all too well, a blatant lie, and sovereign debt was misrepresented. Earlier, a report in the FT Deutschland suggested that the bailout of Anglo Irish alone, (not to mention AIB and Irish Nationwide) would be sufficient to threaten the country's solvency. Things domestically are no better, after a poll in the Sunday Independent found that 74% of respondents believed the country would default, and preceded earlier news that Irish consumer confidence plunged from 66.2 to 61.4.

Mmm, European yield stew FT Alphaville

Those bond markets and Irish debt Superb Video

Greek Deals Hidden From EU Probed as 400% Yield Gap Shows Doubt Bloomberg
Sept. 8 (Bloomberg) -- Four months after the 110 billion- euro ($140 billion) bailout for Greece, the nation still hasn’t disclosed the full details of secret financial transactions it used to conceal debt.

“We have not seen the real documents,” Walter Radermacher, head of the European Union’s statistics agency Eurostat, said in a Sept. 2 interview in his Luxembourg office. Eurostat first requested the contracts in February.
Beware of Greeks Bearing Bonds Michael Lewis / Vanity Fair
As Wall Street hangs on the question “Will Greece default?,” the author heads for riot-stricken Athens, and for the mysterious Vatopaidi monastery, which brought down the last government, laying bare the country’s economic insanity. But beyond a $1.2 trillion debt (roughly a quarter-million dollars for each working adult), there is a more frightening deficit. After systematically looting their own treasury, in a breathtaking binge of tax evasion, bribery, and creative accounting spurred on by Goldman Sachs, Greeks are sure of one thing: they can’t trust their fellow Greeks.

CEBS says the stress tests were JUST FINE FT Alphaville

Surprise, surprise....

Welch Überraschung....

Got GOLD ? ;-)

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Blogger jmf said...

Bank Default Swaps Rise Most in Month on Bets for More Capital Bloomberg

The cost of insuring against losses on bonds sold by European financial companies rose by the most in a month on concern higher capital requirements and losses from sovereign debt holdings will endanger the recovery.

The Markit iTraxx Financial Index of credit-default swaps on 25 banks and insurers rose for a second day, climbing 6.5 basis points to 136, according to JPMorgan Chase & Co. at 11 a.m. in London. European government debt risk also rose.

Investors are concerned the Basel Committee on Banking Supervision will propose higher capital requirements when it meets today, limiting banks’ ability to lend. Europe’s biggest lenders are already facing losses on more than 134 billion euros of Greek, Portuguese and Spanish bonds, according to a Bloomberg News survey.

The Basel Committee is readying new capital and liquidity rules for world leaders to agree on when the Group of 20 meets in Seoul in November. Germany’s 10 biggest lenders, including Deutsche Bank AG and Commerzbank AG, may need about 105 billion euros ($135 billion) in fresh capital because of new regulation, the Association of German Banks said yesterday.

4:04 AM  

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