Big Picture Catalysts to Watch Coming Up in the next few weeks European Bank Stress Tests

Big Picture Catalysts to Watch Coming Up in the next few weeks – resolution on these issues would remove a major overhang for the market. 
· Financial Regulatory Reform – see the broader update. 
· European Bank Stress Tests – European bank stress tests - results could be published by mid-Jul - in an attempt to break the market panic that surrounded its banks and debt markets this week, the Bank of Spain said it would conduct "stress tests" of its banks and publish the results to the public.  The news took much of Europe by surprise and caused shock - while many other countries have been conducting similar tests on their institutions, no other major nation was prepared to divulge the specific individual results to the public.  However, at a European leaders summit on Thurs, the major countries of the EU, inc. Germany, said they would follow in Spain's footsteps and publish the test outcomes (the results are due to start hitting in mid-Jul).  Investors will be focused on two critical issues: 1) whether the assumptions underlying the tests are "credible" (i.e. are they
assuming steep declines in economic growth and an outright debt default by a major European nation?  If the test parameters are relatively mild, the market might look right through the tests; 2) will there be mechanisms in place to deal w/any capital shortfalls to the extent they are uncovered by the tests?  DB's CEO warned that the tests could wind up being a disaster if no capital plug is introduced alongside the results.  According to a recent Reuters article, "In parallel with the publication of the individual results, if necessary, governments will be expected to say what course of action they can envisage…. Under no circumstances would a bank, that may be under distress, be left out in the cold,"  The same Reuters article said the ECB has insisted that programs for bank recapitalization be in place when the tests are published.  According to a Marketwatch article, Spain's Banco Santander and BBVA may be rated the two healthiest banks in Europe when the European Union publishes the results of "stress tests" in the coming weeks, while analysts say Germany's unlisted landesbanks could be among the weakest.   Markwatch