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WSJ's Reilly says the U.S. Federal Reserve's effort to make stress tests unpredictable and keep the banks guessing is how it is supposed to be done for tests to be effective. This prevents banks from gaming the tests. The Fed has other interests to protect- the nation's financial system and taxpayers. Only by designing the tests correctly can the Fed ensure that it is doing its job of safeguarding the U.S. financial system.

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The effects of school closures on the mental and emotional health of children is the subject of this report in the NYT by Ellen Barry. It is more evidence of the role that schools play in protecting children at difficult times and when homes come under severe stress. 

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The encouraging sign is that bank by bank results -with how the exposure plays out for sovereigh default risk- will be released in the European bank stress test resullts. Access to funds from private capital and a degree of transparency helped banks in the US recover their footing.The same access to private capital could help recapitalize European banks, in addition to the access they have to public funds.

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People tend to keep digital email, messages and photos longer than they need them thinking they may come in use someday like a pair of old pants. This digital clutter and unerased digital stuff just adds to stress. It also makes the important stuff less visible. Speed in internet performance is also a factor. WSJ looks at this problem.

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Some excellent ways to cope with growing stress and anxiety during coronavirus and the elections. The important thing is to move to something else, to take a break and think of something beautiful. A short burst of exercize, a walk can be very helpful. Practice rhythmic yoga type breathing. Try doing some other things that are on your work list.

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Reports from hospitals and healthcare workers in Indonesia shown here in The Guardian provide a picture of a health system under severe stress. The government was not able to curb travel during the Eid holiday. Packed airports, bus stations and railways during the holiday travel period combined with the high transmission rate from delta variant has hit the country hard.

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The U.S. Fed, America's central bank, barrs bank buyback of shares and limits dividend payouts to quarterly profit. The Fed does this as it warns banks they could sustain heavy losses of $700 billion for soured loans if the economy is slow to recover over several quarters, and unemployment remains high. The Fed's latest stress test for banks included the impact of the coronavirus epidemic. At this time the Fed says banks are healthy and this is protective action to keep the banks in safety.

Another sign of the changes taking place in finance and banking- swift action by the U.S. central bank leadership to stop early any potential improper behaviour of banks to do debt buybacks or dividend payout not meeting rules related to profit. 

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The UK Education Report from Education Secretary Bridget Phillipson as shown in The Times says “In practice, high standards currently too often means high standards for some — our ambition is high standards for all”. It sees the basic emphasis on knowledge depth and excellence in education, the infrastructure as working well and intends to keep this. The change is to bring all schools up to these higher standards. Childcare infrastructure and services would be made available to all.  Rote education and stress on memorization, taking too many GCSE exams, student stress from the large number of exams more than Ireland and twice that of Canada, not enough apprenticeship training programs, will be points that will receive attention. “The national curriculum should remain relevant and up to date while embedding and recognising the importance of cultural knowledge stemming from the past.” More emphasis on developing this kind of national curriculum. ...

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Basel 2 and 3 allow banks and regulators considerable latitude to calculate risk-weighted assets. Investors aren't certain that the reported capital ratios fully reflect the risks on bank's balance sheets. The Irish banks passed the European stress tests but had to be bailed out. Greek, Portuguese and some Spanish banks also find themselves shut out of private sector funding markets.

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The Bank of Cyprus and the Cyprus Popular Bank (Laiki Bank), passed stress tests given by the EU in 2010 and 2011. By the end of 2010- even as other banks such as Barclays were cutting their Greece government bonds by over 50%- the two banks held 5.8 billion euros of Greece bonds, over $1 billion euros larger exposure to Greece than nine months earlier, according to European regulators. Regulatory supervision failed to alert the banks and the banks risk management failed to see the warning signs in Greece. The Laiki Bank Risk Officer went in the opposite direction actually increasing exposure to Greece, saying in a conference call in August 2010, that he had used the bank's capital position "to deepen selectively some highly profitable client relationships." What went wrong with the stress tests by the EU regulators in July 2010 of these two banks, was that the tests looked at what would happen if economic conditions deteriorated, but did not consider the possibility that government bonds could produce losses. The two banks suffered total booked losses of 4.3 billion euros in 2013 from holdings of Greece bonds. The EU stress tests of July 2010 showed the two banks having total of 572 million in surplus capital. The two banks then went on to issue dividends in 2010-2011 totalling 141 million euros. By March 2013 the Laiki Bank was "on respirator" for a few months, according to the Central Bank of Cyprus, until the 10 billion euro EU bailout in March 2013 with the closing of Laiki Bank and the sharp downsizing of Bank of Cyprus....

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With only 4% of the people vaccinated in a population of 97 million Vietnam faces severe stress from the Delta variant. Ho Chi Minh City faces the effects of an extended lockdown. The outbreak of coronavirus and lockdowns have put millions of people out of work or on reduced pay.

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Prof. Admati, of Stanford, says that with the March 2012 stress tests the Fed has prematurely announced the banks are healthy. Prof. Cole of DePaul University, questions some of the assumptions used by the Fed as too optimistic even though it used a 13% unemployment rate and decline in stock and real estate values by 21%. He says the loss of $56 billon on home equity lines of credit and second lien mortgages, 13% of the portfolio, is highly underestimated. He says the legal liabilities of banks are also underestimated.

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A worldwide trend to shorter term borrowing means that institutions and sovereign governments will compete in the capital markets, as they try to roll over existing borrowing by 2012. The US has $1.3 trillion to roll over by 2012. Worldwide about $5 trillion has to be rolled over, and of this $2.6 trillion is in Europe. With the European financial crisis which started in Greece it is becoming harder for sovereign governments to borrow in capital markets at favorable rates. A former economist of the Bank of England says this is of the highest importance for lending and for growth. The implications are reduced lending by banks to businesses and consumers, reducing output and growth, and limiting reductions in unemployment. It is a big issue say analysts, as debt needs to be rolled over over shorter periods. Moody's study shows new bond issues by banks during the last 5 years matured at an average 4.7 years. The stress say experts is likely to be on the less healthy banks like the savings banks in Spain, Landesbanks in Germany. Stress tests on European banks will be out July 23, 2010....

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The European Banking Authority has worked on an exam for European banks since October 2011- separate from earlier stress tests- to determine the capital shortfall at banks arising from potential losses on bank holdings of sovereign debt. The EBA says banks in the eurozone will have to come up with 114.7 billion euros in new capital by June 2012, to meet reserve capital requirements for core Tier 1 ratio of 9%. The EBA looked at bank holdings of European government bonds as of Sept. 30, 2011. Loss rates for government bonds were applied at current market prices for the debt, and banks that fell short of the Tier 1 capital ratio of 9% were identified. This is different from the stress tests in that the stress tests were designed for banks to withstand deteriorating economic conditions, where a range of losses were applied to test for resilience. Spain and Italy have capital shortfalls of 26.2 billion euros and 15.4 billion euros respectively. Germany has a capital shortfall of 13.1 billion euros, France 7.3 billion euros, Portugal 6.9 billion euros, Belgium 6.3 billion euros. Banks have till January 2012 to show how they will come up with new capital. EBA officials will ask banks to do this without restricting lending. Germany's Commerzbank has a 5.3 billion euros capital shortfall, and may need government funds. Italy's UniCredit SpA plans to make a 7.5 billion euro share offering to its existing investors which will address most of its 8 billion euro shortfall. Spain's Banco Santander is divesting assets in Brazil, Colombia and Chile to meet a 15.3 billion euros shortfall. France's BNP Paribas and Societe Generale have shortfalls of 1.5 billion euros and 2.1 billion euros, which they plan to meet by selling billions of euros of assets....