Just 7 Of 91 Banks Fail Europe's Test — Was It Too Easy?

Yahoo Finance (IBD) ^ | July 23, 2010

[Cheap_Hessian]

European regulators said the vast majority of banks passed stress tests, boosting U.S. stocks in the afternoon. But analysts wondered if the tests papered over key risks, notably financials' holdings of government bonds.

Seven of 91 banks — five Spanish as well as one German and one Greek — failed the stress test. Regulators assessed the banks' ability to survive a double-dip recession based on how much sovereign debt they hold on trading books, not hold-to-maturity bonds.

The problem, analysts say, is that banks hold much more long-term bonds and the stress test didn't take into account possible government defaults or restructurings. Concerns of a Greek, Spanish or other European debt crisis are what triggered the stress tests.