Europe’s biggest banks are braced for the outcome of financial health checks that could expose the extent of the weaknesses of the world’s oldest bank, Monte dei Paschi di Siena (MPS), and send shockwaves through the markets.

However, the tests – due to be published on Friday – are being viewed by some analysts as a missed opportunity to gauge the full extent of the fragility of the banking system in Europe. Only 51 banks are being assessed, compared with 124 in 2014, and they will not be given a pass or fail mark as in the past.

Of the 51 banks being tested by the EU-wide European Banking Authority, only MPS failed two years ago. “We think it is a missed opportunity that the EBA 2016 stress tests will not be used to do a fuller and deeper health check of the banking system in Europe. This is especially the case as in some countries the smaller banks are the least sound. A case could have been made to include more banks rather than less,” said Tomas Kinmonth, an analyst at Dutch bank Abn Amro. The fate of the Italian banks is being closely watched. “Italy could provide the watershed moment for European banks. If a banking crisis were to start in Italy, we believe it would spread throughout Europe with the more levered names in the sector bearing the brunt of the pressure,” said analysts at Berenberg.           (The Guardian)