A little shock for the Germans while we’re at it, with resonances for the whole Eurozone. From FT Deutschland:
The chief economist of the European Central Bank (ECB), Juergen Stark, considers the German banks to be undercapitalized. Stark made this statement on Wednesday at a meeting with the head of Unions Parliamentary Group in Berlin, according to participants. He was referring largely to savings banks and regional banks (Sparkassen und Landesbanken). Accordingly, [Stark] called for privatization of the German savings banks, based on the successful Spanish model. The ECB declined to comment.
Jürgen Stark’s comments feed doubts about the local banking system.This is even more surprising given the positive results for the regional banks in the stress test of the EU in July, in which the ECB were heavily involved.
Well, whether any of that is a big novelty is debatable: not if you read Hubert in the comments, or read Yves’s posts passim, for the last couple of years at least, or anything at all about the recent stress tests, apart from the official puffs. Very tasteless remarks, these. Good for Stark, though there is some serious politics going on, no doubt, when the ECB’s Chief Economist contradicts the ECB.
Apart from the nationalized Hypo Real Estate, which took part hors concors, as it were, all the banks, even in the worst scenario, reached the required minimum capital ratio. According to statements at the time by the Bundesbank and BaFin, which share regulatory responsibility, the banking system was “robust” and “resistant”. Admittedly, the German savings banks, unlike the Spanish Cajas, did not take the test.
So he’s administering a glancing blow to BuBA and BaFin as well. Hmm. Takeaway: some breaking of ranks in Europe on the quality of the stress tests.
Meantime, irrespective of all that, Stark agrees that the German banks are going to need rather a lot of new capital because of the Basel III changes to their very arcane capital calculations.