• Germany's news in English

Bank fails EU stress test

The Local · 15 Jul 2011, 20:27

Published: 15 Jul 2011 20:27 GMT+02:00

Facebook Twitter Google+ reddit

"Twelve German participants passed the stress test," the central bank declared after the European Banking Authority (EBA) released its results in London.

A 13th German bank, the state-owned regional bank Helaba, was not mentioned in in the Bundesbank's statement.

"Helaba decided against the publication of its result by the EBA," the German Finance Ministry explained in a separate statement.

German officials have voiced support for Helaba in its dispute with the EBA, which centres on the definition of the core capital a bank must hold to be sure of withstanding exceptional shocks to the financial system.

A large part of Helaba's core capital is comprised of what are known as 'silent participations' by the western German state of Hesse, which means it does not have voting rights commensurate with the number of shares it owns.

If these type holdings were included in the calculation of Helaba's core ratios, it would have a core capital ratio of 6.8 percent, comfortably above the test's threshold of 5.0 percent.

Without the 'silent participations,' which are worth €1.92 billion ($2.72 billion), Helaba's core capital ratio falls to 3.9 percent.

German central bank vice president Sabine Lautenschlaeger told a press conference in Frankfurt that Helaba had the right to withhold publication of the tests using EBA critera since "the publication of test results was on a voluntary basis."

The executive director of BaFin, the German financial markets watchdog, added that Helaba's absence was "not a disaster," although he allowed it was "regrettable."

Helaba spokesman Wolfgang Kuss told news agency AFP: "Under the EBA conditions the bank failed, that is clear. From our point of view we were successful."

He underscored results published on the bank's website using the standard EBA template but the bank's own calculation.

The line for core equity ratio showed that the "6.8 percent is our figure including silent participations," Kuss said.

Two other regional banks, HSH Nordbank and Nord/LB, just squeaked by meanwhile.

Overall however, "in Germany, no adjustment is necessary because shareholders in German banks that were tested had already taken steps to reinforce their capital, where that was necessary," Finance Minister Wolfgang Schäuble said.

Story continues below…

Other German banks tested included number one Deutsche Bank, Commerzbank and state-owned Hypo Real Estate, which had flunked an easier test last year.

"Undoubtedly the stress tests have been useful in singling out a few particularly weak banks" across the European Union, said Marie Diron, senior economist at Ernst & Young.

"But the adverse scenario considered by the new European Banking Authority in this years tests still did not include the impact of a formal debt default by a European government, which is the single greatest risk facing the European banking sector at present," she added.

"Another shortcoming in the design of the stress tests is that they are performed on a bank-by-bank basis, overlooking the damaging feedback loops that can develop between individual banks, as well as the broader economy, during times of financial stress," Diron said.


The Local (news@thelocal.de)

Facebook Twitter Google+ reddit

Your comments about this article

21:31 July 15, 2011 by r2d2c3po
The last two paragraphs make it clear what a joke the whole exercise was. It is nice to ignore real threats when you want to maintain a fantasy of solid banks.
Today's headlines
Eurowings cabin crew union to strike all day Thursday
Photo: DPA.

UPDATE: A union representing cabin crews on Lufthansa's budget airline Eurowings has announced that strikes will last all day Thursday as ongoing contract negotiations continue to falter.

Hesse hopes to set example by building Iraqi orphanages
Refugee children in northern Iraq. Photo: DPA

The wealthy central German state of Hesse has set aside €1 million to build a school, family homes and an orphanage in northern Iraq, in an effort to help refugees there.

The Local List
10 German clichés that foreigners get very wrong
David Hasselhoff. Photo: DPA

Whether it be efficiency, humourlessness or a love of a certain Baywatch star, there are many cliches stuck in the heads of foreigners about Germany. But how true are they?

Fake Germanwings victim relative convicted in Cologne
A torn piece of metal at the crash site in 2015. Photo: DPA

A German court on Wednesday gave a woman a year's suspended jail sentence for posing as the cousin of a victim in last year's Germanwings plane crash and obtaining compensation offered by the airline.

Couple accused of torturing, murdering women go on trial
The so-called 'house of horrors' in Höxter where the couple allegedly tortured and killed women. Photo: DPA.

A couple accused of luring women to their village home with personal ads started trial on Wednesday over charges that they tortured and killed at least two of their victims.

After July attacks, govt drafts new video surveillance law
Photo: DPA

The Interior Ministry is drafting a law which will enable public spaces to be filmed for surveillance purposes as a reaction to deadly attacks in July, according to a newspaper report.

Merkel: murky internet giants distort perception of reality
Angela Merkel. Photo: DPA.

Chancellor Angela Merkel called on Tuesday for internet giants to make public their closely-guarded algorithms, claiming that they are not giving people diverse enough information.

Pegida leader 'paid court costs with group's money'
Pegida leader Lutz Bachmann. Photo: DPA.

The leader of the anti-Islam movement reportedly used money from Pegida's coffers to pay for two personal court cases, German media reported this week.

Anger as Berlin scraps Turkey concert on Armenia genocide
The Dresden Symphony Orchestra. Photo: DPA

Germany's foreign ministry Tuesday scrapped a planned symphony performance on the Armenian "genocide" in its Istanbul consulate, sparking accusations that it was caving in to Turkish pressure.

Obama to visit Berlin in last presidential trip to Germany
President Barack Obama and Chancellor Angela Merkel during a Berlin trip in 2013. Photo: DPA.

The White House announced on Tuesday that US President Barack Obama will be paying one last unexpected visit to the German capital - his last before he leaves office.

10 ways German completely messes up your English
Sponsored Article
Last chance to vote absentee in the US elections
Germany's 10 most weird and wonderful landmarks
10 things you never knew about socialist East Germany
How Germans fell in love with America's favourite squash
How I ditched London for Berlin and became a published author
12 clever German idioms that'll make you sound like a pro
23 fascinating facts you never knew about Berlin
9 unmissable events to check out in Germany this October
10 things you never knew about German reunification
10 things you're sure to notice after an Oktoberfest visit
Germany's 10 most Instagram-able places
15 pics that prove Germany is absolutely enchanting in autumn
10 German films you have to watch before you die
6 things about Munich that’ll stay with you forever
10 pieces of German slang you'll never learn in class
Ouch! Naked swimmer hospitalized after angler hooks his penis
Six reasons why Berlin is now known as 'the failed city'
15 tell-tale signs you’ll never quite master German
7 American habits that make Germans very, very uncomfortable
Story of a fugitive cow who outwitted police for weeks before capture
Eleven famous Germans with surnames that'll make your sides split
jobs available
Toytown Germany
Germany's English-speaking crowd