Euromoney (November Issue)
Despite the relative success of recent stress tests, “the financial sector remains at the core of the eurozone’s economic woes. Weak corporates and overleveraged households continue to weigh on bank balance sheets and lenders across the region remain vulnerable to write-downs.” The “flimsy” stress tests failed to “address the underlying problems of bad credit that slow growth and lowflation are compounding…. The euro banking crisis remains.”
Tags: Bad credit, Balance sheets, Economic woes, Euro banking crisis, Financial sector, Households, Lenders, Lowflation, Overleveraged, Stress tests, Write-downs
Institutional Investor (May Issue)
Today’s investors are in some ways wiser from the lessons of 2008. “Investors are paying more attention to tail risks; they are more conscious of the need to carefully manage liabilities as well as assets; and they are appropriately more skeptical of reliance on third parties like rating agencies.” In other cases, however, investors have yet to learn the right lessons. Institutional Investor identifies four of these as “relying on stop losses, buying options, stress testing and crowding into certain trades.”
Today’s investors are in some ways wiser from the lessons of 2008. “Investors are paying more attention to tail risks; they are more conscious of the need to carefully manage liabilities as well as assets; and they are appropriately more skeptical of reliance on third parties like rating agencies.” In other cases, however, investors have yet to learn the right lessons. Institutional Investor identifies four of these as “relying on stop losses, buying options, stress testing and crowding into certain trades.”
Tags: Options, Rating agencies, Stop losses, Stress tests, Tail risk
Wall Street Journal (July 24)
The European bank stress tests leave one “not much wiser.” For fear of suggesting the EU’s bailout package is insufficient, the stresses did not include a test for a sovereign default. The tests were restricted to more modest (and less revealing) shocks. The tests, however, could have been even less useful. Germany opposed the public release of results for individual banks. In the end, Spain and several other countries won this argument so bank-by-bank data is available.
The European bank stress tests leave one “not much wiser.” For fear of suggesting the EU’s bailout package is insufficient, the stresses did not include a test for a sovereign default. The tests were restricted to more modest (and less revealing) shocks. The tests, however, could have been even less useful. Germany opposed the public release of results for individual banks. In the end, Spain and several other countries won this argument so bank by bank data is available.
Tags: Banks, Europe, Sovereign default, Stress tests
