Spain to Clean Up Kitchen With Bank Tests as Bailout Looms

When Spain reveals the size of the hole in its banking system with the publication of stress test results later today, the credibility of that estimate risks being undermined by a deteriorating economic outlook.

The test conducted by Oliver Wyman on 14 banking groups is a precursor to the formation of a so-called bad bank to which troubled lenders will transfer soured real estate to bolster their balance sheets. The results will be released after the market closes in Madrid.