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a) The outcome of the upcoming stress test results have been partially anticipated. The Governor of the Bank of Italy, the French Minister of Finance and the Chairman of the British FSA are confident about their
respective results. Analysis predict that the TIER 1 capital ratio of 6% would be largely achieved by the European
Major banks.

b) Obviously a stress test, to be credible, need to report some bearable bad news too. Additional fund raising
might be needed by Greek banks, Spanish Cajas and some of the German Landesbanken.
(To be noted that representative of both Spanish Cajas and German Landesbank have recently declared their confidence in the results).
The important aspect is that the outcome shouldn't be too negative - this might have a negative impact on several Asian investors that might refuse to buy European bonds in the future. The results of the tests wi...

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- The rebound of the Euro, fueled mainly by Spanish bonds auction confirms my previous theory that the European are full of opportunities as their problems have been largely overstated. Even Greek banks are becoming interesting given the possible mergers in their highly fragmented market and the interest of some Sovereign Wealth Funds in acquiring largely undervalued Greek banks.

Overall I think European companies present better opportunities than U.S. ones. As an example of U.S. related issues we should note that some US States like California and Illinois are struggling to replay their bonds (cutting wages and deferring payments to suppliers) so in a way they are in a worse situation than many European Governments;

- Given the substantial penalization of European banks and the new financial regulations in the U.S. European and Swiss banks are ...

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Strategy: Banks and Regulations in Europe

- French Economy Minister Lagarde voiced her optimism about the upcoming stress tests results to be releases by
July 23. As Der Spiegel reported last week apparently some regulators were against the sovereign default scenarios to be part of the tests so the devil is in the detail and much depends on which methodology will be used. I feel that a sovereign default scenario is very difficult to forecast and unlikely to happen, at least in the short-medium term.

In my opinion most of the European banks will pass the stress tests and surprise positively BUT to be successful these tests need to be transparent, have a credible and solid methodology and a clear conclusion/action plan.

- Markets perceived the call for austerity of ECB President Trichet as bad news. The are clearly two predominant s...

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