ECB Stress Test Could Reveal Widespread Weakness

We still have a good six weeks before the European Central Bank (ECB) reports back on stress test results, but following the Banco Espirito Santo SA (ELI:BES) bailout, expectations are already riding low, and Federal Financial Analytics, Inc co-founder and managing partner Karen Shaw Petrou thinks that the best case scenario is still pretty grim.

“At best, Europe’s banks will come under long-delayed capital pressure that -- while warranted -- will have the unintended effect of pushing them out of the markets in which they need to stay for Europe to come out of its prolonged...