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German Banks Are Critical Of Tough Standards For Stress Tests

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http://www.nytimes.com/2011/04/04/business/global/04banks.html?_r=1&ref=business

FRANKFURT — A review of European banks could become a day of reckoning for some troubled German institutions, amid signs that the authorities may impose a tough standard for the funds that can be used to meet reserve requirements.

The European Banking Authority, which is conducting the stress tests, is expected to announce in the coming days how it will define capital reserves, the money that banks are required to set aside for unforeseen shocks.

Representatives of Germany’s public sector banks, while insisting the institutions are healthy, have expressed alarm in recent days that the standard may require them to exclude much of the borrowed capital they use to bolster their reserves. As a result, some German banks could fail the test, analysts said.

The tougher requirement would “create a danger that healthy institutions could be artificially made to appear sick,” Heinrich Haasis, president of the German Savings Banks Association, said in a statement Friday.

If the more severe definition of capital caused some German landesbanks to fail the stress tests, they could be required to raise more money, or in extreme cases even wind down their operations. Because the landesbanks are typically owned by state governments and local thrift institutions, German taxpayers would ultimately bear much of the financial burden. In that case, the landesbanks could become a liability for Chancellor Angela Merkel at a time when her party, the Christian Democratic Union, has lost ground in recent state and municipal elections.

This is pure genius!!! If your short of money and need to improve your "reserves" just borrow the money.

If you are in any doubt just how fooked the entire financial system is this is a prime example, banks aren't keeping reserves they are keeping "borrowed" money which no doubt is counted on another banks balance sheet as a reserve. So these reserves could work providing both banks don't need the money at the same time...

The whole banking system is a ponzi fraud.

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It is my understanding that it's no secret the landesbanken are in little better shape than the cajas.

Or for that matter than Northern Rock or RBS were (maybe still are).

Edited by indirectapproach

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It is my understanding that it's no secret the landesbanken are in little better shape than the cajas.

Or for that matter than Northern Rock or RBS were (maybe still are).

They are in much better shape they have the combined weight of the Irish and Greek taxpayers underwriting them.

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The tougher requirement would “create a danger that healthy institutions could be artificially made to appear sick,” Heinrich Haasis, president of the German Savings Banks Association, said in a statement Friday.

:D bwahahaha oh stop, stop, you're killing me lmaoooo :D

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Please yes bring in this requirement, then fear the savers moving their money.

This would give savers a way of making their displeasure felt. Personally I would like banks only able to lend the money that they hold on deposit, not going to happen until their is a revolution but it would stop this idea that you can have or would want never ending growth.

Edited by Ulfar

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Using borrowed money as a capital base is silly, specially in a falling market....the debt is real.

as the banks get drained, what is left...well, its loans, and these are either paid, negotiated or defaulted.

Edited by Bloo Loo

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Not really different to Barclays lendng money to people to buy bits of its business off them so they can raise capital is it?

Indeed it might be marginally better because presumably the German banks are borrowing that money off someone else rather than just issuing it to themselves.

There can't be anything wrong with this model.

The BoE print their own money to buy our own gilts and they must know exactly what they are doing :huh:

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  • 312 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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