ECB assessment: Relief in Germany
Against cautious expectations, only one out 25 participating institutions in Germany failed to comply with the ECB capital requirement.
Among the 25 German banks surveyed, only Münchener Hypothekenbank, a German regional bank, failed the liquidity test. Other banks, including Deutsche Bank, Commerzbank, DZ Bank, HSH Nordbank and IKB passed the CET 1 requirements of 5.5% and 8% respectively.
German institutions under observation raised an additional €14.4 billion in capital from the beginning of this year to the end of September.
However, the ECB did stress that challenges such as the level of NPL’s in the German shipping industry constitue an ongoing cause for concern. “The ECB became concerned about the high sensitivity of certain German banks’ CET1 ratios to long term cash flow assumptions used for provisioning of shipping loans” the assessment said.
In a join statement, the German Bundesbank and banking supervisor Bafin responded positive to the results of the comprehensive assessment: “The comprehensive assessment (CA) conducted by the European Central Bank (ECB) has determined that the balance sheets of the 25 participating German institutions are sound and that the banks’ capital position would be sufficient to withstand a severe economic shock.”
Dr Elke König, president of Bafin commented: “Almost all of them made it to the finish line of the Comprehensive Assessment without tripping over even a single hurdle. Of course, no bank can or should rest on its laurels.”
However, the Werner Sinn, president of the ifo institute expressed criticism: “ The ECB choose to avoid a scenariotaking into account deflation in Southern Euope and has consequently found only low capital deficits among many banks.” He accused the ECB of basing the stress test on an implicit inflation scenario in order to prevent too many banks from failing.