BREAKING….new evidence blows stress test cheating wide open.

WALL ST JOURNAL BACKS SLOG REVELATIONS ABOUT UNDERSTATEMENT OF EXPOSURE.

NEW FEARS ABOUT STRESS TESTS HIT EURO FOR SIX

The EU’s recent stress tests of of major banks understated some lenders’ holdings of potentially risky government debt, a Wall Street Journal analysis confirmed today.

An examination of the banks’ disclosures indicates that some banks did NOT provide as comprehensive a picture of their government-debt holdings as regulators claimed. Some banks excluded certain bonds, and many reduced the sums to account for “short” positions they held—facts that neither regulators nor most banks disclosed when the test results were published in late July.

The Journal’s analysis of wide variations between formerly stated and current liabilities entirely supports the Slog exposee of August 24th last, when we pointed out the Barclays Bank Italian debt discrepancies in particular. The Journal piece today asserts that

‘the exposure to government debt of at least some banks, such as Barclays PLC and Crédit Agricole SA, was reduced by a significant amount, according to industry officials and financial filings made by the banks….the stress tests’ reported sovereign-debt levels differed, sometimes widely, from other international tallies and from some banks’ own financial statements.’

For the first time, the EU’s regulators are caught lying by this latest analysis. In the original spin accompanying stress-test publication, they claimed:

‘The disclosure of total exposures to sovereign debt by individual banks allows for a full assessment of their respective capital positions.’

This was quite simply untrue.

The new revelations have slammed into the Euro like a haywire truck. The buck began trading at 0.776 to the Euro this morning EST, but as I write is 0.783. So far mid pm BST, Sterling has risen from 1.196 to 1.204. The FT adds that ‘the reports have reminded investors that, at the least, the eurozone financial system still has the capacity to throw up the odd unpleasant reminder of the credit and sovereign debt crises – a concern all the more resonant on a day when austerity measures lead to France enduring another big strike.’