Only 8 out of around 90 big European banks failed the stress tests. Early expectations were for about 13 to 15 failures. This positive result sent EUR/USD 20 pips higher, and down once again.
Stress Tests II promised to be more serious. Perhaps they were better than last year, when all Irish banks passed only to collapse four months later.
The full count is slightly more complex: out of 91 banks, one “bailed” out: German Landesbank Helaba. So, if we count this is a failure, we get 9 out of 91.
In addition to the full failures, we have 16 banks that hardly made it to the 5% core capital required by the tests. But still, as aforementioned in the preview to the stress tests, they do not take a sovereign default into account, hence the question in the headline. Is this serious?
There still isn’t a clear answer.
EUR/USD reacted with a small rise which was erased quickly. The markets found it hard to analyze the results, 3000 data points for each bank, so quickly.
Over the weekend, analysts in the countries that had their banks tested will dig into the banks’ numbers and exposure. So bank stocks might suffer from a “Black Monday”, and some will get stronger. European bank stocks had a strong impact on the euro in the past week, and they are likely to do so now as well.
For more on EUR/USD, see the euro dollar forecast.
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