German regulators brush off stress test concerns

FRANKFURT (BestGrowthStock) – German regulators brushed off criticism on Monday that German banks’ failure to detail their sovereign risk exposures as part of European stress tests had raised concern over transparency in Europe’s largest economy.

Many analysts have criticized the tests of 91 European banks as too soft, but have welcomed the disclosure of data that could help investors make up their own mind about banks’ exposure to government debt in weaker southern European economies.

Only seven banks — six German ones and Greece’s ATEbank — did not publish their sovereign debt exposure on Friday, though some have since released the data or promised to do so.

The Committee of European Banking Supervisors (CEBS), which oversaw stress tests, said disclosure was key to the exercise, which was aimed at restoring confidence in the banking sector.

“CEBS has strongly encouraged the participating banks and their supervisory authorities to disclose detailed information on their exposures to EU sovereign debt,” it said in response to a question about German disclosure. “The disclosure of this information is considered as an essential part of the exercise.”

The Financial Times reported earlier that European regulators would probe several German banks, including Deutsche Bank and Hypo Real Estate, about why they did not publish their sovereign holdings with test results released on Friday.

“From looking at the data, it appears Spain has tried hard to provide appropriately harsh stresses on the loan book, and Ireland too,” Morgan Stanley said in a note on Monday.

“However, some countries and some types of banks look less harsh (Italy and Germany stand out for us).”


But German bank regulators played down the prospects of a clash with EU counterparts on the issue, saying disclosure of lenders’ sovereign debt exposure was not compulsory.

“Naturally, as supervisors, we support transparency,” a spokeswoman for German regulator BaFin said. “Participation in the tests was voluntary and the decision to publish the results, including sovereign exposure, was also voluntary.”

A Bundesbank spokesman echoed that view.

The Bundesbank and BaFin, which share responsibility for banking supervision in Germany, have no legal means to force lenders to publish the results, but some commentators said the decision by top German banks to hold back was ill-considered.

Deutsche Bank declined to comment on why it had not disclosed its sovereign exposure but indicated that it may give more details when it reports second-quarter results on Tuesday.

Contacted by Reuters, Postbank gave more details. Exposure to Portugal was 0.05 billion euros ($64.6 million) on July 20, a spokesman said. Exposure to Italy was 4.6 billion euros, while the figures for Ireland, Greece and Spain were 0.3 billion euros, 1.3 billion and 1.2 billion, respectively.

The other banks that did not disclose sovereign holdings — DZ Bank, WGZ Bank and Landesbank Berlin, which passed the test, and Hypo, the only German bank to fail — were not available for comment.

The market appeared to brush aside concerns with Postbank shares 2 percent and Commerzbank 1.1 percent higher at 1200 GMT.

Deutsche Bank shares were 1 percent lower on concerns that the lender may have to accelerate its takeover of Postbank, of which it already owns almost 30 percent.[ID:nLDE6671VH]

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(Reporting by Edward Taylor, Jonathan Gould and Philipp Halstrick in Frankfurt and Steve Slater in London, Editing by Lin Noueihed)

German regulators brush off stress test concerns