Buiter was right about Europe’s phony bank stress tests and the Dutch mortgage crisis

I am going to make this one quick but I thought it was necessary to call attention to this issue because it highlights how opaque the banking landscape in North America and Europe presently still is. Nationalised Dutch lender SNS Reaal, the fourth largest bank in the Netherlands, has recently been nationalised despite a reported 13 percent Tier 1 capital level in the most recent round of banking stress tests in Europe (pdf here). Clearly, the stress tests weren't particularly stressful. I would go so far as to say they were 'phony'. As Citi Chief Economist Willem Buiter warned in the Dutch press last month, more writedowns are unavoidable, especially if house prices in the Netherlands continue to decline.

FT Alphaville has a good post on the SNS Reaal issue that I highly recommend. The lo...


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