Stress tests to put spotlight on Italy and Greece

The Comprehensive Assessment of the euro-zone’s banks published on Sunday should go some way towards restoring sentiment in the banking sector. After all, the adverse economic scenarios to which the banks have been subjected are fairly extreme. But the tests are likely to reveal shortfalls in the Italian and Greek banks in particular. Associated recapitalisation efforts by banks there and the lingering threat that state bail-outs will be needed will act as a further drag on their fragile economic recoveries.