Given the stress that is there currently, it is absurd to believe that only 7 banks (out of 91) will fail. Not surprisingly there were 5 Spanish banks. But no French, Irish or Italian banks? That's a surprise. Clearly, the conditions applied were not as stringent as economic prudence would have suggested.
According to a CEBS release, the evaluation took into account only the potential loses on the government bonds that the banks trade and not the ones they hold to maturity. This clearly means that sovereign bond holdings are given a kid glove treatment. While one needs more time to read the fine prints, there is hardly any doubt that the test leaves a lot to be desired. It would be interesting to know how many banks are on the brink and just about avoided failure.