Friday 23 July 2010

gordian knot

The European Union banking sector is expected to report today on the findings of its self-assessment--the stress test.  Studying 91 major banking institutions that represent some 65% of all EU transactions seems pretty comprehensive, but I wonder what junk-journalism and bad review practices were learned from the Americans and their financial report card.  This too could prove too secretive and selective to be of any real value in terms of guidance or for pointing out potentially explosive deficiencies.  Low marks could trigger a crisis in the sector and non-findings would probably garner due suspicious in this exercise.  I hope, though, it becomes a good heuristic tool: the bankers framed their analysis in some moderately dire economic and growth conditions: EU in recession and veering into worse territory.  Maybe the threshold was set too low or the research was not of expected rigor, but seeing what impact the banks can withstand, I think, is an important first step.  The EU is not simply one big undifferentiated mass of debt and subsidies and there may be some saving vindication in store yet.