Stress Tests

No need, honestly, I'm feeling fine. Not under any pressure at all.

The stress tests have been applied to the banks, idiot.

What stress can they be under? They just sit there, screw their customers and collect their bonuses as usual.

It's all to do with the EU Commission which wanted to demonstrate the splendid shape that the European banks are in.

So how do you detect stress in a bank? They don't have any blood pressure and you never see them snacking on valium.

Well it's partly a secret and it's probably too technical to explain but capital ratios are at the centre of it. Essentially, have the individual banks enough pennies tucked away to deal with any shortfall in the repayment of the loans they made earlier?

Enough, enough! You know this kind of thing makes my head hurt. So what was the result, anyway?

Of the 91 banks tested, seven failed. But the failures were Spanish, Greek and German tiddlers, so that's all right. The British big four passed with flying colours.

So everybody was happy, yes? Apart from the failures obviously.

Well, not really. Were the stress tests demanding enough? Or were they designed to ensure that the big boys passed, while sweeping out a few tiddlers in order to maintain a patina of credibility?

I'll ask the questions if you don't mind. So what happens now?

Not a lot really. The failures will have to improve their capital ratios. But the whole exercise will be forgotten when the next financial crisis occurs.

A bit of a waste of time, then?

You might say that - I could not possibly comment.

Do say: Well done, banking chaps and chapesses. You may now resume normal service, even if that includes not lending to businesses while paying yourselves handsome bonuses.

Don't say: Keep taking the tablets and try to relax more: take some time off, play a bit more golf and don't worry about the office.