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Goldman Sachs survey raises concerns about banking stress tests

A survey by Goldman Sachs has today made many investors sit up and rethink their strategy in the short to medium term with expectations that 10 out of the 91 European banks to be stress tested by the European Union will fail. The poll of 376 respondents took in long-term investors and hedge funds with a detailed knowledge of the European markets and the European economy. So what does this mean?

There is no doubt that nobody expects all of the 91 European banks to pass the stress test, otherwise there would have been rumours of a stitch up, but it will be interesting to see who, if anybody, does fail the test. There are also expectations that additional finance in the region of €37 billion could be raised by European banks in the short to medium term to increase their capital backing behind the scenes.

While in many ways the idea of the European bank stress test was to help alleviate fears in the short to medium term it may well highlight the weakness of a very small portion of the European banking sector. The consequences for these particular banks are difficult to predict but would you as an investor be happy to invest in them?

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