LONDON — All but seven of 91 European banks passed the much-anticipated “stress tests” aimed at showing Europe’s banking system is sound enough to weather the continent’s debt crisis — an outcome that officials hoped would forestall further market turmoil.
It had been thought that some banks needed to fail for the exercise to be accepted as credible, and some analysts still argued that the results showed the tests weren’t rigorous enough — the euro was trading flat on the day after the release of the results at just below US$1.29.
If stock and bond markets take the view that the tests were not tough enough when European trading resumes Monday, then the exercise could make matters worse — and further expose the EU to charges that it has failed to rise to the debt crisis within its borders.
“The stress tests do not seem that stressful and it is looking more like a political whitewash rather than a genuine attempt to reassure financial markets that eurozone banks have balance sheets that could really withstand sovereign risk shocks,” said Neil MacKinnon, global macro strategist at VTB Capital.
“They are delaying the day of reckoning,” said MacKinnon.