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Stress Assessments at European Banks Also Test Credibility: View

The European bank stress-test results are in, and the good news is that, of 90 lenders reviewed, only eight failed: five in Spain, two in Greece and one in Austria. A ninth bank, Germany’s Landesbank Hessen-Thueringen, probably would have failed but refused to disclose its data. Sixteen others narrowly passed, the European Banking Authority concluded.

The bad news is that banking regulators say the eight test flunkers will need to raise a mere 2.5 billion euros ($3.5 billion) in fresh capital by year-end. How can that be bad news? Because the number lacks credibility. Almost no one believes that’s all it will take to shore up Europe’s troubled institutions, especially if Greece or another of Europe’s fragile economies defaults on its debt, which looks increasingly likely.