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Stress-Test Data May Spur Instability, EU Document Says

The risks to financial stability from analysts using European Union stress-test data to conduct their own exams on banks “should not be underestimated,” according to a confidential document prepared by EU officials.

There is an expectation the European Banking Authority stress-test results will be “challenged by market tests” aiming to address “the perceived weaknesses in the design,” according to the draft document obtained by Bloomberg News. That may result in nations with lower-rated sovereign debt struggling to borrow money to fund their banks, according to the document.