The stress level of investors ahead of today’s release of “stress test” results on Europe’s banking system isn’t as high as it was in the spring of 2009 when the global financial system was teetering and big U.S. banks were put through a similar test to see if they could survive if an already bad economy got worse. This test will give a picture as to what is the maximum stress level a bank can take in the system.Still, Wall Street is hoping that the bulk of the 91 financial institutions in Europe undergoing the tests will pass — which is the current consensus view as European policymakers have issued reassuring comments. Investors also hope that banks that do fail won’t have to raise massive amounts of additional capital. For those institutions that would need to raise cash, analysts say it will be important for them to specify how they plan to raise the money, either through financial markets, government aid or eurozone bailout funds. Europe’s committee of bank supervisors has finally agreed on some basic criteria that should be applied in a series of co-ordinated tests of the ability of the region’s biggest banks to withstand a downturn. The idea of testing banks’ ability to withstand various scary scenarios is a sensible one. There is still some debate as to how much to credit the stress tests carried out in America for restoring trust in its biggest banks, but few people think they were a bad idea.
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What is stress test in USA?