This post will outline the second bank stress test joke of the day with the first one detailed in “European Bank Investors, Don’t Look Now – You’ve Been Hoodwinked, BamBoozled…“. According to the MSM news outlets, Germany’s PostBank, along with practically every other German bank except clearly insolvent and near defunct HyPo have passed the stress tests. So have French top banks, Portuguese, Italian, Finnish and Swedish banks. What? You’re not laughing yet? You know how we feel about the Spanish banks, so I will not go there right now (but will leave a trail of links at the bottom of this post for the uninitiated). What we are going to do now is focus on the farce that is passing Germany’s Post Bank, a clearly insolvent (1.4x over insolvent) institution whose only potential (and that’s just a potential) saving grace is the possibility of a forced takeover by a larger bank.
Let’s revisit a few pages from the professional subscriber document, 
Deutsche Bank vs Postbank Review & Summary Analysis – Pro & Institutional (subscribers can follow along on pages 3, 4, and 5):
Now, I know this Texas stuff is for Yankees, but there is some credibility to it. If one were to strip out the intangibles of PostBank an compare it to practically any measure that has to due with collateral value (most assuredly padded), impaired assets, or loss allowances, this banks is INSOLVENT! No, I didn’t say in need of a nominal amount of capital, I said I-N-S-O-L-V-E-N-T!!! Get the point yet? But it can pass a European stress test though! It gets worse. Using the Eyles test shows that its shortfall as a % of tangible equity is 175%! Whaaaatttt???!!!! The banks is insolvent, nearly twice! I can go on, but if you haven’t got the picture yet, you are either a European bank regulator or you will never get the point. For those that are curious re: the other metrics, read on… Over half of their holdings are junk!
Not only did the European tests not find Post Bank insolvent, they declared it didn’t even need any capital. Why the European markets don’t tank due to this f@#$%ing farce is beyond me. The aggregate results of the test and methodology can be found in this 55 pages document. Below you can find related BoomBustBlog European bank research.
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Lies, Damn Lies, and Sovereign Truths: Why the Euro is Destined to Collapse!
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Ovebanked, Underfunded, and Overly Optimistic: The New Face of Sovereign Europe
Subscription research (Click here to subscribe)
Actionable Intelligence Note For All Paying Subscribers on European Bank Research
A Review of the Spanish Banks from a Sovereign Risk Perspective – retail.pdf
A Review of the Spanish Banks from a Sovereign Risk Perspective – professional
Ireland public finances projections
Spain public finances projections_033010
Banks exposed to Central and Eastern Europe
Greek Banking Fundamental Tear Sheet
Italian Banking Macro-Fundamental Discussion Note
Spanish Banking Macro Discussion Note
- Deutsche Bank vs Postbank Review & Summary Analysis – Pro & Institutional
- Deutsche Bank vs Postbank Review & Summary Analysis – Retail
- Sovereign Contagion Model – Retail (961.43 kB 2010-05-04 12:32:46)
- Sovereign Contagion Model – Pro & Institutional
- Irish Bank Strategy Note
- Euro Bank Soveregn Debt Exposure Final -Retail
- Euro Bank Soveregn Debt Exposure Final – Pro & Institutional
- Sovereign Debt Exposure of European Insurers and Reinsurers (Empty 2010-05-19 01:56:52)
Interested parties can read the entire 50+ article Pan-European Sovereign Debt Crisis series by clicking here.
Tags: Commercial Banks, Current Affairs, Financial Shenanigans, Global Macro, Heard on the Street, Research, UK and Eurozone
check this out, so so awesome
http://www.cnbc.com/id/37398076
I saw that. I give the blonds more credibility than the stress tests, cuter too!
I saw that. I give the blonds more credibility than the guys behind the stress tests, cuter too!
Being a European (lived there for my first 30 years), I was, in the beginning, shocked at how much Americans were disclosing about everything.
They even told me “you can call your city and ask them to send you their balance sheet”. That was shocking to me, really.
In Europe, the general mentality is to not disclose much. That’s one of the reasons that the European crisis errupted so much later than in America.
I worked in three different sectors there: manufacturing (small business owner), computers (sales) and insurace (life and health + mutual funds). Regulations were almost ZERO in investments in Greece. You could sell stocks without a license (there wasn’t one anyway), and you got your insurance license just by paying a fee to the chamber of commerce.
Problems were hidden under the rug. I was fortunate to work for an American company which was very prudent at the time (don’t laugh, it was AIG’s department in Greece, and it was indeed the most prudent and with full disclosure that was shocking for the market).
There’s a lot more problems in Europe than meets the eye (including the “health system” which is a failute in more than half the EU countries, and very expensive, contrary to what they advertise for naive Americans to be jealous, I lived it, and so did my 240 clients). They will solve these issues by reducing the wealth of their citizens, little by little, as usual. Problem is, it’s happening here too.
Take care. Good blog.
I live in the UK and I wish I could say “Reggie Middleton’s analsis is rubbish”instead its excellent and nearer to the truth than our own MSM is pushing.In February 2008,the Daily Telegraph on-line,ran an article about the dreadful condition of banks in Europe as well as the UK.The article showed than European banks needed Trillions of Euros.The article rested on their website for all of fifteen minutes before being pulle-without explanation.Here we are today dependent on Reggie and his analytics to tell us the same truth.When are we going to be more open in Europe and the UK?
Even WSJ says the stress tests were lame.
Lame is one thing, but the criteria were so lax that the result should have been the actual tanking of the markets for the only reason to fudge the numbers that much was if there were some very significant problems to hide.
@ Maria
Thanks!