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Stress test

July 26th, 2010 · No Comments

On a brighter note, we think the European stress tests are actually quite positive. We read many complaints that about not including possible effects of sovereign debt crisis, but we have to point out that:
– Outright default is very unlikely, in a case of severe crisis a restructuring will ensue, producing ‘haircuts’
– There is ample financing available (in the form of the EU and IMF nearly $1T package). The biggest impetus for this financing, after all, designed to soften the impact on French and German banks of a possible Greek default.

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