Friday, September 10, 2010

Not even the end of the beggining

The statements by Jürgen Stark, the German representative on the board of the European Central Bank,
is reported to have told a group of Christian Democrat MPs in Berlin that the German banking sector as a whole is undercapitalised. More controversially, he advised them to privatise the saving banks – the ultimate taboo because the savings banks are consider sacrosanct.

At the same meeting the FT report that,
Martin Blessing, chief executive of Commerzbank, said at a banking conference on Thursday, organised by the Handelsblatt newspaper, that about half of the German banking system also had no access to capital markets to raise equity. This is because many banks’ public or mutual ownership structures exclude the possibility of outside investors.

One begins to wonder whee the money for teh EU bail out of Greece is going to come from.
Germany’s association of public sector banks warned on Wednesday that €50bn ($63.5bn) of so-called silent participations – a hybrid form of capital often used by German banks – could be “regulated away” if they were no longer permitted to count towards core capital.

“The tightening of capital rules is directed against the German banking system,” the association said, adding that Germany should be prepared to veto an agreement this weekend.

It followed a warning from private sector banks that Germany’s 10 largest banks – a mix of private, public sector and mutual institutions – could be short of €105bn of capital.

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