Europe's Real $122 Billion Bank Stress Test Is Coming Later This Year

In the end, all questions of whether the European bank stress tests were actually stressful enough are red academic.

The market (and by "the market" we're including the generosity of the ECB) will decide which banks survive and which don't.As such, the real stress test will occur over the coming several months.

Banks in Europe’s most indebted nations need to refinance $122 billion of bonds this year, likely paying high interest costs even after receiving a clean bill of health from regulators.

Italy’s Intesa Sanpaolo SpA has the most debt coming due at $28 billion, followed by UniCredit SpA with $21 billion, according to data compiled by Bloomberg. Italian banks must refinance a total $69 billion of bonds this year and $157 billion in 2011, while Spanish lenders have $28 billion and $73 billion of debt that needs to be paid.

Will they pull off the capital raises? Almost certainly. Fears over being refinancing cliffs tend to be overhyped. Crises and bank failures happen, but usually not on a neat schedule that can be anticipated like this. Still the process should be interesting, and again, serve as something of a stress test, giving investors a clearer look into the health of these firms.