ECB Stress Test Manual

Manual here and press release here.

10 replies on “ECB Stress Test Manual”

The Great Underwriting of Financial and Investor Interests (GUFII), all compliments of the public purse and social services throughout Europe.

Making Europe save for investors. No investor will be left behind, while there is a public purse to be plundered.

Oh…. man… you know it is a serious document when they start off with a explanation page for the 3 letter abbreviations. Distance to Default!!

Next month is the join up…. and finalization is in October!!!

Not easy reading however, a bit of chewing is required.. take the below excerpt..


For credit losses, five types of test will be run:

1 comparison of starting point PD PIT and LGD PIT parameters with outcomes of AQR collective provisioning challenger model and other analysis of default flow.


The bottom line in all the mumbo-jumbo is that whatever embedded investor losses are uncovered by the ‘stress tests’, these losses will be shored up, by the public purse in each State or in the final analysis by the ESM, another public purse, that Ireland is bunging with €250 million per year. [€500 million to the ESM so far to my knowledge, with a potential contingent liability of €11 billion].

This despite being told that Irish banks will not get a cent from the ESM fund, as ‘our banks’ don not qualify, and that the State will have to shore up any shortfalls, yet again.
The bank stress tests are the heist to beat all heists, under the guise of ‘making sure the banks are secure’.
Now, what sane person could object to ‘making the banks secure’.

OK that’s the manual, but shouldn’t there be a page at the back to tear off and pop in the post, where you write your country’s address and phone number, in order to register for the guarantee?

fyi – Steve Keen

Considering Economics? Consider Kingston

If you know any UK student who is considering doing economics at University, please refer them to this blog post. This Thursday, you’ll find out your A-Level results. Whatever they are, if you are considering doing an economics degree, then I want you to consider doing it at Kingston University. At first glance, that’s something you wouldn’t do if you had a choice, because Kingston rates well down the list in the Guardian League Table. Why choose Kingston—which is at the bottom of the Guardian’s list—if, for example, your A-level results would get you into Oxford, which is at the top? A clue as to why can be found in The Guardian itself—not in the League Table, but in a recent column by The Guardian’s senior economics commentator Aditya Chakrabortty, entitled “Uni­ver­sity eco­nom­ics teach­ing isn’t an edu­ca­tion: it’s a £9,000 lobotomy“. –

They should have done the stress tests in Q1 when everyone’s gander was up.
The EZ panjandrums are always too slow .
I bet Italy’s debt dynamics will lure the market back to tail risk discussions before too long.

And that darling of the it’s all right Jack brigade, the UK, is really struggling to generate the salary increases that might justify a genuine recovery.

2015 could be a real rubbernecking bonanza.

Cliff Taylor (today’s SBP) , raises the potential problems that PTSB might have in getting through the stress tests, primarily due to its loss making trackers.
However, PTSB would presumably have less trackers than AIB. The difference being that AIB is seemingly able to offload the tracker losses onto those with variable rates, or onto other all other borrowers.

Either way, the tracker losses (or tracker subsidy, depending on how you look at it) are being absorbed by the general economy.
The only reason PTSB sticks out like a sore thumb is that, unlike AIB, it does not have have enough ‘other suckers’ to pass the losses onto.

The whole subsidisation of tracker mortgages, both OO and BTL, seems absurd, particularly in the case of banks that were clearly insolvent, and that would have gone to the wall without state support.
There is certainly a good justification for levying trackers for the overgenerous subsidy being paid for by others borrowers and by general taxpayers.

Agreed re the lunacy of subsidising trackers to the tune of 700 million per annum, when there are so many alternatives that need the money.

German bond yields are now below 1% and Irish ones aren’t far behind. The bond market seems to be saying that deflation is the future. If that is the case a lot of the banks are not going to be right for a VERY long time, regardless of what the stress tests say.

Remember 2011

Comments are closed.