You just have to love the new round of stress tests in the European Union being conducted on banks. Maybe this headline of “Groundhog Day Meets Spanish Inquisition” seems full of pun, but that is just reality. The Independent reported that of the 90 banks being stress tested in Europe, the Irish wards of the state via Bank of Ireland (NYSE: IRE), Allied Irish Banks plc (NYSE: AIB), and Irish Life & Permanent will pass those tests.
This is good news. Really good news. Unfortunately, that good news has the caveat that it is good as long as you have no recollection of 2010 and the first round of stress tests. Didn’t the Irish institutions and just about all of the other E.U. banks in the lands of the PIIGS and the E.U. pass a different stress test last year? Haven’t many been forced to raise capital at the sovereign level and banking level just to remain viable?
The Independent’s “informed sources” expect the Irish outfits will “comfortably” pass the stress test, but it was also noted that analysts expect five to fifteen banks may fail the tests overall with certain regional institutions in Germany being considered the most vulnerable. These stress tests are intended to analyze an institution’s adequacy of capital reserves in the face of an economic shock.
The growing financial problems in Greece, Italy and Spain and a generally hectic week in European markets should in theory make this round of announcements closely-watched. The problem is that this is the E.U.’s Groundhog Day, and now it just seems routine that the Spanish Inquisition has moved into all of the financial institutions. Does that make the ratings agencies the inquisitors?
Allied Irish was up 7% at 11.8 cents and Bank of Ireland was up 2% at 10.1 cents in Ireland’s trading as of this morning.
JON C. OGG