One German bank fails stress test: regulator

15th July 2011, Comments 0 comments

One German bank of 13 tested has failed the European Union bank stress tests, the financial market regulator BaFin and central bank said on Friday.

They did not immediately identify which bank flunked, but the only one missing from a list of 12 that passed was the state-owned regional bank Helaba, which had already warned on Wednesday that it would not pass.

Helaba, which weathered the global financial crisis without additional public aid, claimed it meets criteria for core capital of at least 5.0 percent, but that the European Banking Authority (EBA) did not take account of changes it had submitted.

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 planned to publish 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 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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