BANK STRESS TESTS THAT LEFT OUT THE MOST IMPORTANT STRESS.

BANK STRESS TESTS THAT LEFT OUT THE MOST IMPORTANT STRESS. This Wall Street Journal article by David Enrich and Charles Forelle describes how the two major banks in Cyprus that have failed were loading up on Greek bonds in 2010 while other banks were cutting down on their Greek bonds, and continued to do so even after the Greek government lost access to international capital markets in early 2010. Despite their large holdings of Greek bonds, both banks passed stress tests conducted by the European Banking Authority in 2010 and 2011. How did the the two banks in Cyprus pass those tests? The European Banking Authority didn’t include in those tests the possibility of losses on government bonds.