Stress Tests

I don't believe that these stress tests hold much importance as nobody is fooled. If they cause a bunch of European banks to raise capital that could be a market negative in the short term as they drain liquidity from the markets.

2 comments:

PJ said...

The significance is that if governments are intervening in the markets, they won't allow one of their propaganda exercises to appear a failure. So at least short-term, the market has to go up at the time of the stress test.

Market Owl said...

The amount of capital they have to raise is very small. The intent was obvious. To reassure the markets with an unstressful stress test and pass all but the most horrible banks.