Banks fail market’s stress test?

Hmmm, few weeks after the stress test results in Europe the Banking sector index shows a terrible picture.

Snapshot

Summary BEBANKS
Value 74.19 One-Year Chart for Bloomberg Europe 500 Banks And Financial Services Index (BEBANKS:IND)
Change -1.930 (-2.535%)
Open 76.38
High 78.83
Low 73.54

At the time I had two points, the European banking sector is undercapitalized and the stress test was a joke. What I see today is that both of those suppositions are true as the first time the baning sector is really tested it fails miserably. In fact the sector shows returns below those from one year ago.

But today not only European banks alone are falling. They are followed by US banks which shows that this again could be a systemic problem.

I am not sure if this is a capital shortage problem or just that banking sector is not seen as profitable anymore. As I said few days ago the key to all this is in the short term money market rates.  Any sign of strain in there will be trouble for the rest of us via the banking sector again.

So far I do not see the signs yet, but I will keep watching.

Interbank rates (overnight)

Interbank lender
Latest
Today’s
change
1 week
ago
1 month
ago
Canadian: LIBOR
0.99% 0.00 0.00% 0.68%
EURIBOR 360 Day
1.22% -0.06 -3.70% -15.08%
Euro: LIBOR
0.99% -0.20 20.80% 72.87%
GBP: LIBOR
0.57% 0.00 0.66% 1.55%
Swiss: LIBOR
0.01% -0.02 -74.07% -82.92%
US$: LIBOR
0.14% <0.01 -9.46% 11.11%
Yen: LIBOR
0.09% 0.00 -13.26% -11.21%

 

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