german banks

A Call for More Capital

frankfurt skyline bloomberg Krisztian Bocsi
Are the clouds gathering over German financial capital Frankfurt?
  • Why it matters

    Why it matters

    The stress test results challenge the notion that German banks are among Europe’s most stable.

  • Facts


    • A European-wide “stress test” examined how a severe crisis would affect the health of 51 banks across 14 countries in the European Union and Norway.
    • In a simulated crisis, Deutsche Bank maintained a core capital ratio of 7.8 percent and Commerzbank a ratio of 7.4 percent – just above the minimum threshold of 7 percent that banks sought to surpass.
    • There are growing calls for German banks to beef up their core capital. Estimates range widely from €2.2 billion to €32 billion.
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As the dust settles over Europe’s latest stress test of the Continent’s banks, Germany’s Bundesbank is doing its best to put a positive spin on the lackluster performance of the country’s two biggest financial institutions, Deutsche Bank and Commerzbank.

“The stress test demonstrates that German banks are equipped to withstand pronounced shocks,” Jens Weidmann, the president of Germany’s central bank, the Bundesbank, said in a statement.

The fact that there is any doubt – that Mr. Weidmann should even have to make such a claim – is a sign of just how far Germany’s two flagship institutions have fallen over the past year.

Markets delivered a different verdict on Monday: Investors sent stocks tumbling as Frankfurt’s stock exchange opened.

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