July 26, 2010 / 7:41 PM / 9 years ago

German bank holdouts reveal PIIGS exposure

FRANKFURT (Reuters) - German banks appeared to cave in to pressure from European Union regulators late Monday as they joined EU peers to reveal the extent of their exposure to heavily indebted Eurozone nations.

The banks — Hypo Real Estate, Landesbank Berlin and cooperative banks DZ Bank and WGZ Bank — joined Postbank to reveal their sovereign debt exposure towards Portugal, Italy, Ireland, Greece and Spain, or PIIGS states.

The exposure to these heavily-indebted eurozone countries has been a concern among regulators following worries earlier this year that Greece might struggle to service its government debt.

The German lenders had initially declined to disclose the extent of their sovereign debt holdings as of the end of March, as demanded by regulators in European Union bank stress tests, a move that drew fire from the Committee of European Banking Supervisors.

Hypo Real Estate then late on Monday said it had 73 billion euros (61 billion pounds) worth of exposure to PIIGS states.

It held 7.91 billion euros worth of exposure to Greece at the end of the first quarter of 2010, of which 7.89 billion euros were held on the banking books.

The Munich-based lender had a further 13.81 billion euros of exposure to Spain, 3.74 billion euros of exposure to Portugal, 37.36 billion euros of exposure to Italy and 10.28 billion euros of exposure to Ireland.

HRE was the only German bank to fail the European stress tests, with a 4.7 percent estimated tier 1 ratio at end-2011 under an extreme scenario, below the 6 percent threshold needed to pass.

Landesbank Berlin on Monday said it had 1.015 billion euros worth of exposure to PIIGS states as of May 31, 2010, most of which was held on the banking books.

Earlier on Monday, Postbank said its total sovereign exposure was 7.9 billion euros as of July 20, with 0.05 billion euros ($64.6 million) exposure to Portugal.

The lender’s exposure to Italy was 4.6 billion euros, while the figures for Ireland, Greece and Spain were 0.3 billion euros, 1.3 billion and 1.2 billion, respectively, the bank said.

Cooperative bank WGZ Bank said it had 4.16 bln euros of exposure to the PIIGS states as of end-March.

Cooperative bank DZ revealed 11.275 billion of exposure to PIIGS countries as of the end of March.

The disclosures leave Deutsche Bank, Germany’s flagship bank as the only lender not to reveal its holdings in the wake of the publication of stress test results.

In earlier presentations in May and June, Deutsche had, however, revealed its exposure to PIIGS states.

Deutsche is expected to reveal more on Tuesday, when it reports second-quarter earnings.

The Financial Times newspaper reported earlier on Monday that European regulators will probe several German banks, including Deutsche Bank and Hypo Real Estate, on why they did not disclose these figures when they published their test results on Friday.

Editing by Peter Dinkloh and Gerald E. McCormick

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