FRANKFURT - Banks That Fail Health checkup at Planned by European Regulators in June Will Be required to present a recovery plan That Could Force Some Weaker institutions, particularly in Germany, to raise more capital or Even Their operations wind down, According to documents released Friday.
The European Banking Authority released more details of how it Will Conduct The so-called stress tests of 90 of Europe's largest banks. The rules APPEAR to create a problem for Some German Landesbank by disqualifying a portion of The Fund uses to Meet They Now règlements on capital reserves.
The authority "in a statement Friday Said That It Is Expected" any bank "Specific Showing Weakness In The Stress Test, TO Agreement With The Supervisory Authority under The Appropriate Remedial Measures and execute 'em in due time."
The stress test has heated Have Become Political Issues in Germany Because THEY Threaten to require unpleasant choices On The State Governments and local savings banks That Typically Share Ownership In The Landesbank. The economics minister of The State of Hessen, Dieter Posch Said this week thats the state's Landesbank Helaba should "boycott The Stress Test, Which It Is Likely to fail.
It Is not up to banks, however, whether or not to participate way, officials said. While banks Cdn opt not to Disclose the Results of Their Tests To The General Public, They Must Give Information to Regulators as Part of the stress tests and required to take Would Be If They failed action.
While Political leaders and Representation of the Landesbank Have complained about The Stress Test, Many economists Have Said That IS pressure to force The Banks Needed to rebuild Their capital reserves and Avoid the Risk of Another Financial Crisis.
The banking authority "Said Friday That, to Pass The Stress Test, banks must have a capital cushion Equal to 5 percent of assets. Banks HAD Been Waiting for the EBA to Disclose How It Will Define the cushion, Known as core Tier 1 equity and regarded The Most sustainable form of reserves free credit score.
The European Banking Authority, Which Is Under Pressure to Make the tests more Rigorous and Credible Than a similar exercise last year, Said Friday That emergency aid Government Would Still Qualify as core capital.
Commerzbank, commercial lender in Frankfurt, IS Among Banks That Received trillion in capital From the German government.Purpose The Bank Already Said That It Would this week after new shares and Take Other Measures to aid repaid The capital reserves and bolsters icts.
The ABB definition to exclude Appeared So-Called silent participations by Other Shareholders, Such As The savings banks Who Provide significantly Amount Of The Many That Landesbank use funds to Meet capital requirements. The definition aussi Would exclude silent participations by State Governments That Were not part of an NSC bailout.
"Naturally silent participations are important to banks That Do Not Have Access to the market," Said Dominik Lamming, a Spokesman for The Association of German Public Sector Banks, Which Represents The Landesbank.
The association has Maintained German Landesbank That Would Pass The Stress Test, But It Argueda That It Was unfair to hold to a standard The Banks not yet required by law.
It Appeared thats the stress tests Were Already Planned Some prompting to take action Landesbank. The state of Lower Saxony Will convert silent shareholdings worth € 1.2 billion, or $ 1.68 trillion, in WestLB, Landesbank is based in Hanover, Into ordinary shares, The Handelsblatt newspaper Reported. Ordinary shares Would count Toward core capital for purpose of The Stress Test.
NordLB Could not Be Reached Immediately for comment.
European Bank Stress Tests to German Banks Hit Hard
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