Ger­man banks reck­less: Bun­des­bank

The Pak Banker - - Company& -

FRANK­FURT: The Bun­des­bank, the Ger­man cen­tral bank, said in its an­nual fi­nan­cial sta­bil­ity re­port that Ger­man in­sti­tu­tions con­tinue to en­gage in risky prac­tices that make them vul­ner­a­ble to a rise in in­ter­est rates.

"Thanks to sta­ble re­turns and im­proved cap­i­tal, Ger­man banks have in­creased their abil­ity to with­stand risk," An­dreas Dom­bret, a mem­ber of the cen­tral bank's ex­ec­u­tive board, said at a news con­fer­ence. But "as be­fore the Ger­man bank sys­tem still dis­plays vul­ner­a­bil­i­ties and struc­tural weak­nesses."

De­spite Ger­many's eco­nomic growth, its banks are among Europe's weak­est.

About 30 per­cent of Ger­man bank debt will ma­ture in less than a year, the bank said, well above the long-term av­er­age of 22 per­cent.

Hypo Real Es­tate, a Ger­man prop­erty lender now owned by the govern­ment, nearly col­lapsed in 2008 be­cause it could no longer bor­row money short term at rates be­low what it was re­ceiv­ing in in­ter­est from cus­tomers with long-term loans.

"As part of a re­newed in­crease in the 'search for yield,' new bub­bles could form in cer­tain se­cu­ri­ties mar­kets," Mr. Dom­bret said.

Banks con­tinue to face sig­nif­i­cant losses from prob­lem as­sets like in­vest­ments in the Amer­i­can real es­tate mar­ket, the Bun­des­bank said. How­ever, the losses will be lower than in 2009 and at the low end of ex­pec­ta­tions. The Bun­des­bank es­ti­mated that banks would book losses of 23 bil­lion eu­ros, or $30.75 bil­lion, this year to re­flect the di­min­ished value of their hold­ings, down from 37 bil­lion eu­ros in 2009. Though new bank­ing reg­u­la­tions, known as Basel III, will cre­ate a more sta­ble sys­tem, the Bun­des­bank said, Ger­man banks will need to raise about 50 bil­lion eu­ros by 2018 to meet higher re­serve re­quire­ments. -PB News

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