Courtesy of Mish.
On October 23, ECB president Mario Draghi announced new bank stress tests. At the time, I offered a “Draghize” Translation. Here is a small snip.
Translating Draghize
For those of you who do not speak Draghize I offer these translations.
Draghize: “Banks do need to fail to prove the credibility of the exercise”.
Mish: We are carefully scrutinizing several non-critical banks, looking for a couple of scapegoats, hoping to fool the public regarding the credibility of the exercise.Draghize: “If they do have to fail, they have to fail. There’s no question about that.”
Mish: If any big banks are in trouble. They won’t fail. There’s no question about that.Draghize: “The test is credible because the ultimate purpose of it is to restore or strengthen private sector confidence in the soundness of the banks, in the quality of their balance sheets”
Mish: The test is credible because we say it is.
War Erupts Over How Much to Water Down Stress Tests
Via translation El Confidencial reports War between Spain and Germany Erupts Over the Hardness of Stress Tests
The new stress tests of European banks have caused the outbreak of a new confrontation between the governments of Spain and Germany. Until now, it was Spain who argued in favor of a tough exercise, similar to what Spain had to undergo when seeking bailout funds.
By contrast, Germany (supported by France and Italy) preferred more lax exercises that do not bring to light the shame of their banks balance sheets of billions in toxic assets, including Spanish mortgage securitizations.
But now the German authorities found one flank to counterattack: the huge public debt exposure of Spanish banks, which they believe should be penalized in these exercises, which can be catastrophic for our financial system when it just starts to lift head.
Sovereign Debt Not All Risk-Free …
