Much ado about nothing. Europe's bank stress tests proved not very stressful at all. A Goldman Sachs survey ahead of the results predicted 10 banks would fail with a total capital shortfall of €38bn ($49bn). In fact, just seven failed with a total capital shortfall of €3.5bn. The failures included five Spanish savings banks and one bank each from Germany and Greece. That is unlikely to inspire much confidence, but the real test will take place over coming days as the market uses the new disclosures, particularly related to sovereign-bond exposures, to draw its own conclusions on the health of individual banks.

The low failure rate is hardly surprising, given the easy terms of the test. Admittedly, it is hard to quibble with the macroeconomic assumptions, with the "adverse" scenario more demanding than the market consensus. It was based on a double-dip recession that would see the eurozone economy shrink by a mathematically unlikely 0.2% this year and grow by just 0.1% next year. But while the stress tests prescribed big increases in default probabilities and loss assumptions, they didn't challenge the banks' current underlying base-case default assumptions, which the market widely suspects are too optimistic.