Trading Floor

Eurozone Stress Tests: A Walk in the Park

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http://www.tradingfloor.com Interview with Mads Koefoed, Market Strategist at Saxo Bank. Deutsche Bank, Societe Generale, and Banco Santander are but three banks in a long list of prominent banks that are included in the soon to be reported stress tests of the European banking sector. The market is eagerly awaiting the results to be published on July 23, which will cover 91 financial institutions in total, but we have already been offered bits of information about the test settings. And from the small amount of information that has been given to us, we expect the results to provide that same optimistic view of the sector that the US stress tests showed a year ago. Even the adverse scenario is much too rosy for our liking. No major haircuts on sovereign debt, no sharp economic contraction, and renewed market turmoil is only stressed to the extent we saw in May. So why do we expect the stress tests to be a walk in the park for most banks?