Monday, July 26, 2010

Germany accused of reneging on bank tests

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By Patrick Jenkins in London and James Wilson in Frankfurt

European regulators have accused Germany and its banks of reneging on a deal to publish full details of sovereign debt holdings, as part of the four-month-long stress test exercise of the country’s banking sector.

In an interview with the Financial Times, Arnoud Vossen, secretary-general of the Committee of European Banking Supervisors, the pan-European banks regulator, said: “We agreed with all supervisory authorities and with the banks in the exercise that there would be a bank-by-bank disclosure of sovereign risks.”

On Friday, CEBS published the results of its stress test exercise, showing seven of the 91 banks tested across the 27 countries of the European Union failed to achieve a tier one capital ratio of 6 per cent once their balance sheets were exposed to a series of macroeconomic scenarios for 2010 and 2011.

The tests – designed to restore nervous markets’ faith in European banks, shaken by the near-default of Greece this year – were supposed to be accompanied by full disclosure of each bank’s sovereign debt holdings.

But six of the 14 German banks tested – Deutsche Bank, Postbank, Hypo Real Estate, mutual groups DZ and WGZ, and Landesbank Berlin – did not publish the expected detailed breakdown of sovereign debt holdings, although Postbank disclosed some information on Sunday. Every other European bank, bar Greece’s ATEbank, which failed the test, complied with the disclosure requirement.

Analysts said the German banks’ non-compliance would fuel suspicion they had something to hide, and risked further undermining faith in the whole stress test exercise, already criticised for its benign scenarios.

Germany accused of reneging on bank tests

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