While I am pretty bullish and think the banking system is now fundamentally sound – a combination that makes people drop their forks in open-mouthed amazement at a certain kind of dinner party – even I’ll admit the EU banking stress tests weren’t exactly testing the banks against Armageddon:
An important caveat is that the chance of another extreme lurch downwards in GDP so quickly after the last is negligible.
In fact, perhaps it could only be brought about by a banking panic inspired by a too-severe stress test! (They’re nothing if not realists in Brussels).
Besides, the main point of the stress tests was to flush data out of the banks and into the market. Now you – or your team of back office quants – can run your own stress test and reach your own conclusions.
(Source: Business Insider)
