Stress tests: Not many dead
I have learned that every major international bank headquartered in the European Union has passed the stress tests.
Only a small number of regional banks (fewer than ten) have flunked and will be forced to raise additional capital.
On the face of it, the results of the health checks on Europe's banks are therefore good news.
Regulators will claim that the European Union's financial institutions are in better shape than many investors and creditors believe.
But some will argue that the tests simply weren't demanding enough, as per my notes in recent days.
What's the bottom line? There are no great new shocks to scare investors and creditors, but nor will there be much reassurance for those who believe that Europe's banks in general need strengthening.
Only seven banks - all of them fairly small - flunked the tests of whether they're strong enough to withstand further financial shocks.
And those weaker banks, which are in Greece, Spain and Germany, need a mere €3.5bn or £3bn of new capital to meet meet the standards required by regulators.
That's not really going to test the ability of either European taxpayers or investors to provide equity finance.
So regulators will claim that the European Union's financial institutions are in better shape than many investors and creditors believe.
But some will argue that the results simply weren't demanding enough.
What was measured was whether the 91 banks have enough capital to aborb the losses that would be generated if the European economy slowed down by 3 per cent compared with the EU's official forecast and if the price of government bonds fell by 23 per cent for Greece, 10 per cent for the UK and 4.7 per cent for Germany (inter alia).
The problem with these scenarios is that the real world could turn out much worse. The Greek government could in theory default on its debt - which would lead to much bigger losses for banks.
And, of course, the European Union could fall into a much worse recession.
Also there are those who believe that the regulators have been unduly kind to banks - especially French and German ones - by allowing them to count as capital certain liabilities that in practice are useless at absorbing losses.
So it's very unclear whether banks' creditors will be reassured or unsettled by the stress test results.
The weekend will be an anxious time for banks, as they wait to learn whether it'll become easier or harder for them to borrow, when markets open on Monday.
How severe were the tests imposed on EU banks?
Well what we've learned tonight is that under the so-called adverse scenario, banks were instructed to assess what losses they would suffer if EU GDP was flat this year and contracted by 0.4 per cent in 2011.
Now in practice that may turn out to be considerably worse than reality. But does it really represent the kind of harsh conditions we'd want and need our banks to survive?
Well, just last year the economy of the EU actually shrank by 4.2 per cent.
So it's clear that banks are not being told that they would have to withstand the kind of hurricane they faced only a year ago.
What size of aggregate losses would this adverse scenario actually generate for banks?
Well, aggregate impairment and trading losses for banks would be €565.9bn over the coming two years, according to official estimates.
Which sounds like a lot of money. But only amounts to €3bn per bank per annum - and doesn't sound enough to represent a credible test.
Of this, banks would suffer €38.9bn of losses on their holdings of government bonds in their trading books. Which again looks unrealistically small in the context of EU sovereign debt of €8.7 trillion - given that much of this lending to EU governments has come from these banks.
The good news is that all the 91 banks have been forced as part of this exercise to disclose how much of their lending to governments is held in their banking books, as opposed to their trading books, and is therefore deemed to be impermeable to losses.
The bad news is that analysts now have plenty of new data, which will allow them to run their own stress tests based on assumptions that they would regard as more realistic.
Which means that banks may find that investors and the market will make a rather different judgement from EU regulators about which banks are too weak.