One German bank fails EU stress test

15th July 2011, Comments 0 comments

One German bank of 13 tested has failed the European Union bank stress tests, but state-owned regional bank Helaba contested the methodology used and released its own results.

Helaba was the only bank missing from a list of 12 that the German central bank and financial market regulator BaFin said had passed.

"Under the EBA conditions the bank failed, that is clear," Helaba spokesman Wolfgang Kuss told AFP, before adding: "From our point of view we were successful."

He stressed that the bank had published its results on its website using the standard European Banking Authority (EBA) template and showing the results using the authority's method, which it contests, and the bank's own calculation.

The former showed a core equity ratio of 3.9 percent, but "6.8 percent is our figure including silent participations," Kuss said.

He also stressed that "we are not against the stress tests. We oppose the method, the special capital definition of the EBA."

Helaba, which weathered the global financial crisis without additional public aid, thus claimed that it meets criteria for core capital of at least 5.0 percent.

The bank said on Wednesday that the EBA, which is running the tests, did not consider changes to so-called hybrid capital agreed to by regional authorities.

Helaba thus insisted on publishing its own results, which showed it had core tier 1 capital of 6.8 percent, well above the required threshold.

That included 1.92 billion euros ($2.72 billion) that is the result of a silent participation by the region, which means it does not have voting rights normally associated with such a stake.

German officials backed Helaba in its dispute with the London-based EBA.

"I understand my colleagues (at Helaba) because the EBA did not do itself proud in my opinion," the head of the BdB private bank federation, Michael Kemmer, told Deutschlandfunk radio on Friday.

Helaba says it notified the EBA of changes it had made to conform to the authority's criteria, but was told at the last minute that the EBA did not have time to study the response.

The German national bank also said that Helaba was "sufficiently capitalised" in its view.

Hesse, a western German state that is home to the German financial capital Frankfurt, said it had committed in late April to amending the silent participations so they would conform to EBA criteria.

© 2011 AFP

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