German banks concerned about ECB review

30th October 2013, Comments 0 comments

The German banking federation BdB called Wednesday for rapid clarification of the legal issues relating to a comprehensive review of 124 eurozone banks by the European Central Bank from next month.

"Key details of the stress test must be clarified quickly. Otherwise we'll be embarking on a flight to destination unknown without knowing how we'll land. This is a risk that must be avoided," BdB president Michael Kemmer told a news conference in Frankfurt.

"The results, or the uncertainty surrounding the anticipated results of both the balance sheet review and the stress tests can have a very direct effect on financial market stability," Kemmer said.

He said the ECB must very quickly make known its methodology and how it intends to publish the results, he said.

The banking chief also called on politicians to "make very clear" who will have to stump up the cash if the ECB's audit uncovers additional financing needs in banks.

Analysts have expressed concern that the lack of detail about the reviews plus the ability of banks to find additional capital would create uncertainty and may lead to a further retrenchment in lending to businesses.

While the BdB rejects any so-called "socialisation" of risk assets via a Europe-wide supervisory authority, it is in favour of setting up a system of national support which could step in if a bank was unable to finance itself via the markets or its shareholders.

Kemmer pointed to the German public aid fund SoFFin as a "good instrument."

The ECB announced last week that it was launching a comprehensive review of 124 eurozone banks. They are to be published in a year's time before the ECB takes over supervision of the eurozone's top banks in the first stage of a banking union.

© 2013 AFP

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