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18 July 2011

Responding to the bank stress tests: Eurozone's leadership – not the bankers - on trial


The EU's bank stress tests have proved one thing beyond all reasonable doubt: on the central scenario, the EU's banks are in good shape. Even on the “adverse” scenario, the general problems appear quite manageable – until the rampant fears about sovereign defaults are factored in.

This is no longer a banking crisis – it is blindingly obvious that there is a full-scale confidence crisis in the debts of some sovereign states who are also the implied guarantors of their banks. If the state is not in trouble, neither are the banks headquartered there. Conversely, if the banks are required to deal with the default of their government (often their largest debtor), then a downward spiral in economic activity is inevitable and imminent.

To read the full article please open the attachment below.


© Graham Bishop

Documents associated with this article

After stress test_leaders on trial_final.docx


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