If you are going to make up a story… Make it a good one.

The world seems utterly unconvinced by Europe’s fairy tale that their banks will live happily ever.

European regulators found that seven banks need to raise a combined 3.5 billion euros ($4.5 billion) of capital, underwhelming analysts who said the stress tests may not have been strict enough.

“The amount of capital needed is much lower than the market expected,” said Mike Lenhoff, chief strategist at London-based Brewin Dolphin Securities Ltd., which oversees $33 billion. “It seems quite trivial considering the concerns about losses from the sovereign crisis.”

They set the bar so low in an attempt to let everyone pass, to build [false] confidence in Euro banks. Even with the bar hovering at floor level some banks still failed.


European governments are using their first coordinated stress tests to reassure investors about the health of financial institutions after the debt crisis pummeled the bonds of Greece, Spain and Portugal. Rising budget deficits in those countries raised concern that they won’t be able to pay their debts.

“This is not reassuring at all,” said Komal Sri-Kumar, who helps manage $118 billion as chief global strategist at TCW Group Inc. in Los Angeles. “These tests were set in such a way that most of them would pass. That doesn’t say to me that the banking system is stable.”

Noone is falling for this, looks like you need a bit more than smoke and mirrors this time.


Before the results were published yesterday, analysts at Goldman Sachs Group Inc. estimated that lenders would need to raise 38 billion euros and Barclays Capital said they would require as much as 85 billion euros. Tests carried out in the U.S. last year found that 10 lenders, including Bank of America Corp. and Citigroup Inc., needed $74.6 billion.

“I don’t think the market is so stupid as to think that they were so wrong,” said Jason Brady, a managing director at Thornburg Investment Management in Santa Fe, New Mexico, which oversees about $57 billion. “The right explanation here is that the testing was not very rigorous.”

Well we think the market is pretty stupid, which goes to show how poor this cover-up attempt actually was.

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