Friday, July 23, 2010

Stress Tests: The Mockery Continues

With regards to the European stress tests results that will be released today, the mockery continues. Bloomberg reports that the 91 banks being stress-tested were "only examined on European sovereign debt losses for the bonds they trade, rather than those they hold to maturity" (according to a draft European Central Bank document).

“The haircuts are applied to the trading book portfolios only, as no default assumption was considered,” according to a confidential document dated July 22 and titled “EU Stress Test Exercise: Key Messages on Methodological Issues.”

And anyone is to believe those results?

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