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German bank watchdog says planned stress tests very demanding
May 20, 2014 / 10:07 AM / 3 years ago

German bank watchdog says planned stress tests very demanding

German financial markets regulator Bafin head Elke Koenig gestures during an exclusive interview with Reuters at the Bafin headquarters in Bonn February 5, 2013.Ina Fassbender

FRANKFURT (Reuters) - The adverse stress-test scenarios being prepared by the European Central Bank (ECB) and the European Banking Authority will prove very demanding for some participating German banks, the head of Germany’s financial market watchdog Bafin said on Tuesday.

But the ECB's balance sheet health check, known as the comprehensive review, was not expected to yield big surprises for the 24 participating German banks, Elke Koenig, president of German financial regulator Bafin, said at a news conference.

"The base-case scenario in the stress tests shouldn't yield any negative surprises," Koenig said. "I cannot rule out, however, that the adverse stress scenarios will prove very demanding for some banks."

Germany's largest bank, Deutsche Bank, on Sunday unveiled plans for an 8 billion euro (6.5 billion pounds) share issue designed in part to strengthen its balance sheet ahead of the stress tests, which are expected to conclude in October.

Bafin on Tuesday said it did not put any pressure on Deutsche Bank to carry out that capital increase.

The bank health checks are being led by the ECB before it becomes the top banking regulator in the euro zone in November. Many of the 128 participating banks have been reducing their risky assets and increasing regulatory capital ahead of the exam.

In January, Koenig warned that some participating German banks may face a capital shortfall in the stress tests.

Reporting by Thomas Atkins and Jonathan Gould; Editing by David Holmes

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