After a highly anticipated week of leaks and rumors over how many, and which banks, will pass or fail the "stress test", the results are in. Only seven of 91 European banks flunked. Such a surprise... well, not really.
On the face of it, this seems like good news. Only seven, not a third, not half, or three-quarters, have issues. Only five banks in Spain and one each in Germany and Greece failed the test. Every major international bank headquartered in the European Union passed the tests, including Deutsche Bank and Royal Bank of Scotland. (See complete coverage of the tests here)
The state of financial institutions in the EU is healthier than investors and creditors had thought, which should boost market confidence. And frankly, that was the point of the exercise. The same type of tests helped U.S. financial firms such as Citigroup and Wells Fargo move forward from the economic downturn of 2008.
The aim of the stress test was to clear up market fears about the strength of the European continent’s banking system in dealing with the debt crisis. It was also an attempt to reassure financial markets that eurozone banks have balance sheets that could really withstand sovereign risk shocks.