“DeltaContinental”– Stress Tests May Reveal UK Bank Vulnerability…

“DeltaContinental” believes that certain players in the UK banking sector may be over-exposed to debt.

Analysts at “DeltaContinental” believe that Britain’s banks may be more likely to struggle with the EU banking stress tests than first thought.

The firm said that the UK’s Financial Services Authority (FSA) tactical decision not to publish the results of the stress tests it conducted on Lloyd’s Banking Group and Royal Bank of Scotland on the grounds that they might set off a bout of short-selling in their shares may return to haunt it if it is found that the banks’ exposure to risky debts in the residential and commercial mortgage sector as well as Eurozone debt creates a crisis of confidence.

“DeltaContinental” analysts suggested at the time that investors should draw their own inferences from the FSA’s refusal to publish the results of the tests it conducted at around the same time that US authorities were conducting a similar exercise on its banks.

Although “DeltaContinental” conceded that the UK banks had had more time to strengthen their positions since those tests, they believe that the sovereign debt issues of Greece and other debt-ridden EU countries may have seen the banks become technically insolvent again.

“It depends on how much of a theoretical haircut the stress test criterion applies to PIIGS nations’ debt” said one “DeltaContinental” analyst. “If it’s Minimal, the banks may scrape through but if it’s realistic, as it should be, we’d be worried”, he concluded.