Today, stock markets around the world are down on a story that the European bank stress test was not rigorous enough in how it dealt with sovereign debt held on bank balance sheets. This should not be new news. It was reported at the time of the release of the stress test that banks in some cases did not “stress” sovereign debt at all, never owning up to the potential of sovereign defaults. The biggest difference though between Europe and the US and even between the US and what Japan went through two decades ago is that US banks were aggressive in raising fresh equity. I am not suggesting there are no problems in European banks from potential sovereign debt defaults, just that nobody should be surprised by anything that came out today.