David Bowie may have been under more pressure than the Irish banks are in their current stress test. Photograph: Peter Still/Redferns
Continuing from last week's Tom Waits-themed post, this week let's take in a little Queen and David Bowie while considering just how stressful the stress tests Ireland's banks are being subjected to really are.
Ireland's banks are, indeed, 'Under Pressure'. But just how much pressure is being assumed in the tests being conducted at the behest of the Irish central bank by Blackrock Solutions, the consultancy charged with the task?
Yesterday the Central Bank revealed details of the scenarios being used to test four banks. The headlines made for grim reading for property owners, with a peak to trough fall in value of between 55% and 60%, as reported in the Guardian by Lisa.
Stress tests are simulations performed on a bank's loan books. The tests look at the likely effects on the quality of bank's assets and liabilities when, say, interest rates rise. When that happens, some people will be unable to pay back their loans, and these people will default, leaving the bank with a bad debt it will have to absorb.