Credit markets are pricing in losses of about 60 percent on Greek bonds should the government default, more than three times the level said to be assumed by CEBS. Derivatives known as recovery swaps are trading at rates that imply investors would get back about 40 percent in a Greek default or restructuring." (Bloomberg)
The tests are a joke. The banks will continue to use accounting-rule changes and other gimmickry to obfuscate their losses. Trichet will use the tests to step up his bond purchasing program (QE) which will transfer the banks losses onto the member states. Many of the banks are insolvent and need restructuring. But they are in no real danger, because they still have a stranglehold on the process.