Stress Test For Banks Was Only Superficial

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This topic contains 34 replies, has 8 voices, and was last updated by Profile photo of peterhun peterhun 6 years, 4 months ago.

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  • #55771
    Profile photo of angie
    angie
    Spectator

    Most economists and those in the City are concerned that the Bank Stress Tests deliberately failed to test for a Sovereign Default, a rather large omission for the PIGS countries right now.

    They tried to pull the wool over investors eyes and it’s failed to do that, analysts saw right through that. Unlike US Bank Stress Tests, Eurozone is made up of lots of nations with differing budgets and problems as in the Club Med countries.

    Even with the lightweight test, Spain had 5 of the 7 potential failures.

    It may be on Monday that markets react unfavourably. 🙄

  • #100060
    Profile photo of katy
    katy
    Spectator

    Spanish newspapers say all Spanish banks passed the test 😆 They don’t count the Caja banks as they aren’t really banks, this is for internal consumption, the Zapatero feel good tonic 😀

  • #100062
    Profile photo of angie
    angie
    Spectator

    Let me have some of that tonic katy, or is it laughing gas? 😆

    The Spanish Gov’t are from another planet again, ‘Denial’ 😆 😆 😆

  • #100063
    Profile photo of Anonymous
    Anonymous
    Participant

    According to who was it superficial? Is this “lay into Spanish economy forum”? Some of it reads like that. Sure, we have a rampant unemployment problem (although it has always had one of the highest unemployment rates in Europe this has changed much).
    Spain was the ONLY county in the EU to put forward all its Cajas and Banks, I remember a little bank called Northern Rock going belly up, ok, its completely nationalised so it doesn’t count.
    And what Cajas were are considered dogdy? Caja Duero, Caja Manresa…I didn’t even know they existed!
    Cajasur was run by Priests! Yes, those gurus of the modern economy!! What did you expect. One of the reasons that Cajas are separated from banks is because they are fundamentaly different in their composition with a huge political involvement and hopefully their failing their test will eventually pave the way to their de-politicisation (hopefully). When politians and priests run the kitty, of course its going to go wrong. There have been some steps, such as Cajasur has been bought out by BBK and Caja Navarra (didn’t fail) is the first bank in Spain to involve foreign capital.
    Hey, but some of the most solvent and safest banks were…Spanish, Santander and BBV. Now I have heard of those two.
    Now I’m not one to get into an argument about this, hell no, I ain’t no financial analyst and have a tough time understanding by pension plan, but what I do see in the forum is a lot of stuff that just isn’t true and every so slightly tainted.

  • #100065
    Profile photo of angie
    angie
    Spectator

    Keep calm Marjal, no-ones having a go at you, only the Spanish Gov’t etc. 😉

    Anyway, since the stress tests were done, just about every comment since by economists etc have questioned it’s validity, not just on Spanish Banks but other Club Med Banks.

    It was obvious the Cajas could come under fire. In answer to UK etc, on http://www.moneyweek.com if you register for free daily emails, it says today that it’s likely there will be another UK Bank Crisis, as well as another StockMarket and Property crash. The UK Banking industry is pretty much loathed by all right now, more so than estate agents.

    Regarding Spain, I think a lot has been done since this website was formed and the regular posters here have probably helped enormously to improve things ultimately in Spain, many of the scammers have left.

    So Marjal, chill out, have a nice drink and I’ll join you 8) 😉

  • #100066
    Profile photo of rt21
    rt21
    Participant

    Hi Marjal

    I think I am one of those that have made highly critical remarks about the Spanish economy on this forum. Although it may come over as “laying into the Spanish economy”, the postings are motivated not from a position of wishing to bash Spain over the head for the sake of it but from a strong desire to make people aware of the risks involved in investing in real estate in Spain and also on some occasions out of personal frustration at the way the country is tackling its economic problems. I should add that my definition of investment includes those who are simply buying property for life style changes.

    The state of an economy has a significant bearing not only on the housing market but also on taxes, infrastructure, medical care, employment, crime and just about anything else you can think of that a potential property buyer would be weighing up when making a decision on whether to buy a property in Spain.

    Many of the current problems associated with the Spanish property market have their roots in economic decisions made at the state and eurozone level. The remainder have been heavily influenced by poor administration at the regional level and also of course by world events.

    In my opinion Spain is ill equipped to handle the pressures that are being exerted on its economy by continued membership of the eurozone. All of this goes beyond the strength or otherwise of the cajas. Something has to give and whatever that is will have a significant impact on its property market.

    Richard

  • #100067
    Profile photo of katy
    katy
    Spectator

    @marjal wrote:

    According to who was it superficial? Is this “lay into Spanish economy forum”? Some of it reads like that. Now I’m not one to get into an argument about this, hell no, I ain’t no financial analyst and have a tough time understanding by pension plan, but what I do see in the forum is a lot of stuff that just isn’t true and every so slightly tainted.

    Bit unfair comment here! Posters are only saying what all the financial pages are saying. Most of the press are of the opinion that the “stress test” was little more than a PR stunt. ALL spanish banks were not tested and many of the ones who passed only just scraped in. They may be “just Cajas” but they are full of toxic debt (not my words).

    So which part of this thread isn’t true and tainted ❓

  • #100068
    Profile photo of angie
    angie
    Spectator

    Agree katy, I was trying to put that to Marjal too, that is was generally thought by all that the tests were superficial. I’m sure a lot more toxicity will be revealed in due course with Spain and other Club Med countries.

    I hope Marjal had that drink 🙂

  • #100069
    Profile photo of Anonymous
    Anonymous
    Participant

    @marjal wrote:

    Hey, but some of the most solvent and safest banks were…Spanish, Santander and BBV.

    Hi Marjal – just in case you missed something I posted about Spanish banks recently, they borrowed from the ECB in June 126.3 billion Euros, and 85.6 billion Euros in May.

    That is over 200 billion Euros in two months! And nearly double what was lent to the whole country of Greece, not just their banks.
    Will be interesting to see what July’s loans amount to, but I’ll let you know when it’s announced. 😉

    With great respect, how can Spanish banks then be described as some of the most “solvent” and “safest” banks?
    And no wonder the majority passed the stress tests with flying colours.

    As for Northern Rock going “belly up”, how many of the Spanish banks would have followed the exact same path if they hadn’t had the advantage of these massive ECB loans? To me, they’re living by the skin of their pants and only surviving through outside help – not by their astute business practices.

  • #100071
    Profile photo of katy
    katy
    Spectator
  • #100074
    Profile photo of adiep
    adiep
    Participant

    Santander is potentially a huge ponzi, how can they pay 6% interest when the nearest anyone else can get to is about 2.5%

    I hope to god they dont get their hands on RBS, else in my mind we’ll be bailing RBS a second time.

  • #100075
    Profile photo of Anonymous
    Anonymous
    Participant

    .

    Emilio Botín, presidente del Santander

    Why don’t I feel inspired to let this man look after my money?

  • #100076
    Profile photo of Anonymous
    Anonymous
    Participant

    Outnumbered, but never outgunned!

    A picture of Botín? Is this for real? Quoting British financial press? Laughable!

    I think this post has run its course; like I said, the proof is in the pudding; lets see where we all are in a year’s time and I either you or me can say “told you so”…

  • #100078
    Profile photo of Anonymous
    Anonymous
    Participant

    Sorry, couldn’t resist it, picture of HSBC Chairman Stephen Green…equally harrowing! Yeah, Botin puts the willys up me too, but I don’t think anyone capable of relaying “confidence and trust” in a picture…look at Carol Vorderman!

  • #100081
    Profile photo of Anonymous
    Anonymous
    Participant

    What’s harrowing about that photograph Marjal? If I were to stand in front of those two and make a choice it would be no contest! Stephen Green doesn’t look like a Mafia agent. (but then I’d never trust my money to anyone in Spain ever again) 😉

    Santander are wanting to spread their risks…outside of Spain.

  • #100083
    Profile photo of Anonymous
    Anonymous
    Participant

    What’s harrowing about that photograph Marjal? If I were to stand in front of those two and make a choice it would be no contest! Stephen Green doesn’t look like a Mafia agent. (but then I’d never trust my money to anyone in Spain ever again)

    Balderick springs to mind. And tell me why you wouldn’t trust your money to anyone in Spain?

  • #100085
    Profile photo of Anonymous
    Anonymous
    Participant

    And tell me why you wouldn’t trust your money to anyone in Spain?

    It’s well documented on this forum Marjal. 😉

  • #100087
    Profile photo of angie
    angie
    Spectator

    Marjal, why haven’t you had that drink yet, don’t take things so personally?

    I’m not keen on Stephen Green because HSBC is my Bank, but, and only joking here, I don’t think he would keep my money under his mattress.

    I think because a lot of people have had bad experiences in Spain like us, it would be difficult to feel comfortable with Spanish Banks like Santander. They’re big, but haven’t they a huge exposure to debt in Spain, South America etc? They wouldn’t be my 1st choice out of a universal bad bunch.

  • #100097
    Profile photo of peterhun
    peterhun
    Participant

    @marjal wrote:

    According to who was it superficial?

    The markets UK and USA for a start, those who have to be convinced. However, Spain is making an effort.
    http://www.cnbc.com/id/38409464
    http://www.bloomberg.com/news/2010-07-24/euro-falls-as-stress-test-results-fail-to-alleviate-banking-risk-concern.html

    The stress tests follow a pattern that has been evident since the outbreak of the acute phase of the financial crisis in September 2008. The EU’s approach to the financial sector has been to apply patchwork fixes – a blanket bail-out, some not very serious recapitalisation plans, plus loads of liquidity – rather than solve the problem.

    A notable exception is Spain, where the situation is the most severe, and where a serious attempt is under way to address it.

    But while in Madrid the stress tests are part of a political commitment to resolve the banking problems, that is not the case elsewhere. A stress test without a resolution strategy – which is what is absent beyond Spain – is entirely pointless.

    http://www.ft.com/cms/s/0/1b00ab58-981c-11df-b218-00144feab49a.html

  • #100100
    Profile photo of katy
    katy
    Spectator

    The markets seem to have taken the stress test well. The Euro is holding up to the dollar and spanish shares were up today 😕

  • #100101
    Profile photo of peterhun
    peterhun
    Participant

    @katy wrote:

    The markets seem to have taken the stress test well. The Euro is holding up to the dollar and spanish shares were up today 😕

    The markets are cattle, they don’t have any intelligence behind them. The real judge was negative.

    Three-month Euribor rates have crept up to a one-year high of 0.889pc. The “Libor-OIS spread”, watched as a key gauge of stress in the system, also nudged up to 26 basis points.

    http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/7911318/Spain-shines-on-stress-test-Germany-flunks.html

    As many are of the banks and EU economies are related, the entire banking system should have been tested for the worst case.For instance a 2% fall in Italian property and 0% for Poland as worst case seems optimistic to me. Spain has a more credible 28% fall in property from peak, but hasn’t it already had over that in the real world and there is years more falls to come?

    A boost in share prices is good for banks to raise capital though and Spanish banks have done well (excluding the fake valuations on their property assets). But the entire EU banking system is screwed so a few relative stable Spanish banks will make little difference when UK banks alone have to raise £300billion next year to replace existing debt.

  • #100102
    Profile photo of Anonymous
    Anonymous
    Participant

    This is a case of you say potato I say potahto…tomayto tomato…I can find just as many articles saying different about the stress tests. Bloomberg? FT, we had to send a Vicepresident to talk to FT because of biased reporting.
    Again, as a Spanish national brought up in the UK this does sound like the “take it out on Spanish economy forum”. It’s as if many participants want Spain to be like Greece.

    As for trusting anyone in Spain, I take slight offense as this is generalising on the whole of Spain as you do say “anyone in Spain”, and I understand that as anyone.

    Like I said before, continue the debate, I was only hoping to put a different light on things as I don’t think we are in such a bad way, and only time will tell.

    As for that drink; mine’s a G&T Bombay Saffire with some lemon juice…I think Emilio Botín is buying!! 😛

  • #100107
    Profile photo of Anonymous
    Anonymous
    Participant

    The title of Angie’s thread: Stress Test for Banks Was Only Superficial

    A Forex analysist explains why in a pretty clear way:

    “There are ample reasons to see the results as suspect.
    By any measure, the aim of the exercise was to show that European banks are adequately capitalized to withstand a sovereign default within the EU or its immediate periphery.

    Interestingly, the Committee of European Banking Supervisors (CEBS) that administered the tests apparently ignored the majority of banks’ holdings of sovereign debt.
    Indeed, CEBS said it only took account of losses on those government bonds held on lenders’ trading books – a small minority of their total holdings – most of which sit on their banking books (meaning the bonds are intended to be held to maturity rather than actively traded).

    Banks need to write down losses from these long-term holdings only in the event of serious doubt about the government’s ability to meet its obligations, which is precisely what would occur in a default scenario“.

    The last paragraph says it all. The tests ignored an essential aspect, therefore they were “superficial”.

    Your thread title was spot on Angie. End of.

    But those who prefer to live in the world of propoganda by Spanish newspapers where the sun always shines, be happy and enjoy. 🙂

  • #100108
    Profile photo of katy
    katy
    Spectator

    @marjal wrote:

    Again, as a Spanish national brought up in the UK this does sound like the “take it out on Spanish economy forum”. It’s as if many participants want Spain to be like Greece.

    Many on here own spanish property and I doubt they want Spain to fall. If Spain fails it will have a knock on effect as some UK banks have also been bankrolling Spain’s property fiasco

    As for trusting anyone in Spain, I take slight offense as this is generalising on the whole of Spain as you do say “anyone in Spain”, and I understand that as anyone.

    I think it was really meaning that they wouldn’t trust a corrupt system that consistently fails to protect foreign buyers. I have some very good spanish friends who I trust but would probably say the same. If you are spanish and are going to take offence at everything said about Spain, even when true, then maybe you should stick to spanish forums (however if you read any andalucian ones you will find they criticise spain more than the British!)
    As for that drink; mine’s a G&T Bombay Saffire with some lemon juice…I think Emilio Botín is buying!! 😛

  • #100111
    Profile photo of peterhun
    peterhun
    Participant

    @marjal wrote:

    This is a case of you say potato I say potahto…tomayto tomato…I can find just as many articles saying different about the stress tests. Bloomberg? FT, we had to send a Vicepresident to talk to FT because of biased reporting.
    Again, as a Spanish national brought up in the UK this does sound like the “take it out on Spanish economy forum”. It’s as if many participants want Spain to be like Greece.

    The stress tests were about ALL European banks and as the article pointed out (and headlined) most Spanish banks passed with flying colours.
    However, Spain is going to get nowhere with its propaganda becuase trust, once lost, is very hard to regain and it only takes a few instances of suspicious behaviour to destroy confidence. Fabricating statistics is what destroyed Greece and there are suspicions Spain is doing the same with its house price falls and unemployment figures. It doesn’t matter what Spanish politicians say and its papers print, it needs to convince the rest of the world to buy its debt and has faith with the economy is restructured. Complaining to the most respected financial paper in the world about ‘bias’ is going to have nothing but a negative effect on the view of Spain by investors.

  • #100113
    Profile photo of Anonymous
    Anonymous
    Participant

    Just stating the facts mate.
    And please tell me what government doesn’t doctor statistics?

  • #100121
    Profile photo of peterhun
    peterhun
    Participant

    @marjal wrote:

    Just stating the facts mate.
    And please tell me what government doesn’t doctor statistics?

    None of them do, if they do it would be pretty serious problem for the country involved.

  • #100125
    Profile photo of Anonymous
    Anonymous
    Participant

    @peterhun wrote:

    @marjal wrote:
    Just stating the facts mate.
    And please tell me what government doesn’t doctor statistics?

    None of them do, if they do it would be pretty serious problem for the country involved.

    Umm, there was a UK government that decided that everyone who was on a YTS scheme would not be considered to be on the dole, I think that wiped out about half a million off the unemployment numbers…that’s not doctoring?
    Every government does it, call it doctoring, call it creative accounting…call it what you want. Look at the US, counting civilian victims as Taliban rebels and then having the gaul to say that these are facts we already knew!
    Statics can be interpreted, communicated in many colourful and subjective ways, so lets be a little realistic here.

    Zapatero was wrong not to say Spain was in a recession until the day after the general elections, yes, Spain is guilty of that; unemployment is ridiculously high, but it ALWAYS has been. Our rate of unemployment has always been one of the highest in Europe, something structural that has worsened with a recession.

    Spain is not perfect, but hang on, it ain’t Greece not by a long way.

  • #100126
    Profile photo of katy
    katy
    Spectator

    Spain is not perfect, but hang on, it ain’t Greece not by a long way.

    I will reserve judgement on that, time will tell 😆

    The Spaniards I know reckon that unemployment is closer to 5 million as people who cannot claim benefits are not counted. I do agree though that all Governments massage the figures.

  • #100127
    Profile photo of peterhun
    peterhun
    Participant

    @marjal wrote:

    @peterhun wrote:
    @marjal wrote:
    Just stating the facts mate.
    And please tell me what government doesn’t doctor statistics?

    None of them do, if they do it would be pretty serious problem for the country involved.

    Umm, there was a UK government that decided that everyone who was on a YTS scheme would not be considered to be on the dole, I think that wiped out about half a million off the unemployment numbers…that’s not doctoring?
    .
    .
    .

    Spain is not perfect, but hang on, it ain’t Greece not by a long way.

    Actually I was talking about fabricating statistics – i.e. lying, not doctoring; which I’d define, as you did, as reclassifying the numbers . I’d say the official Spanish house price figures are fabricated they are lies with the specific intention of reducing the bad debt hit that banks have to take.

    Edward Hugh’s take on the bank tests.

    http://spaineconomy.blogspot.com/

    @katy wrote:

    The markets seem to have taken the stress test well. The Euro is holding up to the dollar and spanish shares were up today 😕

    First the European bank stress tests that most banks were bound to pass; now the easing of Basel III capital and liquidity proposals that, by the new implementation date of 2018, banks are bound to fulfil. It is very hard not to view the Bank for International Settlements’ relaxation of rules and stretched implementation timetable as yet another win for the banking lobby. The threat of regulators whacking up capital adequacy ratios was one of the last big unknowns for investors. That European banks’ stocks jumped 5 per cent on Tuesday suggests that fear is rapidly evaporating.

    http://www.ft.com/cms/s/1092acf4-995a-11df-9834-00144feab49a,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F3%2F1092acf4-995a-11df-9834-00144feab49a.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fuk%2Flex

  • #100129
    Profile photo of Anonymous
    Anonymous
    Participant

    I’d say the official Spanish house price figures are fabricated they are lies with the specific intention of reducing the bad debt hit that banks have to take.

    Hmm, the problem is, this was taken into account.

    One question for those who DO consider Spain=Greece; where do you live? And what is your angle?
    I have no problem in stating I am a Spanish national, proud of what my country has achieved in recent decades and willing to improve what is wrong. I vote the party I consider to be able to give me solutions not point out problems.

    I’m just pointing out what I believe is the truth and decide to read both International and Spanish press; sometimes they coincide, sometimes they are just plain lies fabricated by a bigger lobby than that of the banks.

  • #100130
    Profile photo of peterhun
    peterhun
    Participant

    @marjal wrote:

    I’d say the official Spanish house price figures are fabricated they are lies with the specific intention of reducing the bad debt hit that banks have to take.

    Hmm, the problem is, this was taken into account.

    One question for those who DO consider Spain=Greece; where do you live? And what is your angle?
    I have no problem in stating I am a Spanish national, proud of what my country has achieved in recent decades and willing to improve what is wrong. I vote the party I consider to be able to give me solutions not point out problems.

    I’m just pointing out what I believe is the truth and decide to read both International and Spanish press; sometimes they coincide, sometimes they are just plain lies fabricated by a bigger lobby than that of the banks.

    Thats part of Spain’s problem isn’t it? Equating the national economy with one’s personal virility. Edward Hugh talked about the outright refusal of the Spanish media to discuss the issues he was bring up last year and the ignorance of the Spanish public. Spain has achieved a lot however its economy is severely uncompetitive and it needs to deflate or devalue by 30%. Until it does so the economy is bleeding out by something like 8% per year; its banks cannot borrow from any other source except the European Central Bank, 126billion euro’s last month. Thats something Spain and Greece does have in common – nobody wants to lend any more money to it and they both have a deficit that needs reducing and neither is (probably) capable of doing so.

    I have zero personal investment in Spain or Greece, just interested.

    Hmm, the problem is, this was taken into account.

    32% worst case fall wasn’t it? Its already, in reality, over that.

  • #100136
    Profile photo of adiep
    adiep
    Participant

    I don’t think Spain has a great deal to be pleased about with regard to its economy. What with 20% unemployment, soaring debts, massive corruption and blatant greed, its hardly the model of an economic nirvana.

    But of course, we all love the Spanish, so hope for thier sake that they get their heads out of their arses and start behaving like the “serious country” that Cap’n Zap is so heard to be harping on about.

  • #100138
    Profile photo of Anonymous
    Anonymous
    Participant

    I have zero personal investment in Spain or Greece, just interested.

    Yeah, right.

  • #100182
    Profile photo of peterhun
    peterhun
    Participant

    @marjal wrote:

    I have zero personal investment in Spain or Greece, just interested.

    Yeah, right.

    Yes, thats right. To be honest, my comments are based on Edward Hugh’s http://spaineconomy.blogspot.com/ feel free to attack him for opinions you don’t like. He’s retired and living in Spain but posts purely for academic reasons.

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