Sense on Cents

“Was ist das, LD?” What is this, you ask?

Did you inadvertently hit your keyboard and Sense on Cents is now being delivered in German?  No, don’t worry about that. Although I have always had a strong interest in the German language and history, my language skills have faded over the years. That said, I think readers should be able to figure out the key German word in my title. (I hope my grammar is correct!!)

In light of the European Bank Stress Tests released on Friday, I am compelled to highlight the fact that for a number of German banks there was “No Transparency with These Tests.” How so? The Financial Times reports, Germany Accused of Reneging on Bank Tests:

European regulators have accused Germany and its banks of reneging on a deal to publish full details of sovereign debt holdings, as part of the four-month-long stress test exercise of the country’s banking sector.

In an interview with the Financial Times, Arnoud Vossen, secretary-general of the Committee of European Banking Supervisors, the pan-European banks regulator, said: “We agreed with all supervisory authorities and with the banks in the exercise that there would be a bank-by-bank disclosure of sovereign risks.”

On Friday, CEBS published the results of its stress test exercise, showing seven of the 91 banks tested across the 27 countries of the European Union failed to achieve a tier one capital ratio of 6 per cent once their balance sheets were exposed to a series of macroeconomic scenarios for 2010 and 2011.

The tests – designed to restore nervous markets’ faith in European banks, shaken by the near-default of Greece this year – were supposed to be accompanied by full disclosure of each bank’s sovereign debt holdings.

But six of the 14 German banks tested – Deutsche Bank, Postbank, Hypo Real Estate, mutual groups DZ and WGZ, and Landesbank Berlin – did not publish the expected detailed breakdown of sovereign debt holdings, although Postbank disclosed some information on Sunday. Every other European bank, bar Greece’s ATEbank, which failed the test, complied with the disclosure requirement.

Analysts said the German banks’ non-compliance would fuel suspicion they had something to hide, and risked further undermining faith in the whole stress test exercise, already criticised for its benign scenarios.

Are we supposed to blindly trust these German banks at this critical point in navigating the economic landscape? Are you kidding me? No! True sense on cents compels us to trust, BUT verify. Without transparency, can there be real truth and integrity in the process AND the results? Nein!!

LD

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This entry was posted on Monday, July 26th, 2010 at 3:19 PM and is filed under Banking Institutions, General. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.