German officials not worried about stress test results

23rd July 2010, Comments 0 comments

German officials were at ease on Friday as they waited for results of bank stress tests aimed at determining the health of Europe's financial sector.

Results of German tests were not expected to show "a need to act" in defence of banks at the heart of Europe's biggest economy, finance ministry spokesman Michael Offer said.

"We are very confident that the expectations we connected with the goals of the stress tests - to calm the markets - will be met and that this trust can then return," he added.

A total of 91 European banks have been asked to estimate what would happen to so-called Tier 1 cash reserves in the event of a second deep recession and sharp losses on government bonds.

Banks that cannot show a sufficient level of core equity will have to find additional funds, either on private capital markets or via government programmes.

The test results are to be released in London by the Committee of European Banking Supervisors (CEBS) at 16h00 GMT on Friday.

In Germany, investors will mainly examine the results of Hypo Real Estate, a distressed property and municipal-finance specialist, and regional state-owned Landesbanken.

The main candidate for failure is HRE, which was nationalised last year and has already said it needs two billion euros (2.6 billion dollars) in fresh funds.

Germany's financial market stabilization fund SoFFin has 255 billion euros in loan guarantees and more than 50 billion euros in capital standing by to help out banks that come up short.

© 2010 AFP

0 Comments To This Article