SOME GERMAN BANKS could fail a new round of EU stress tests if tougher requirements for funds used to bolster reserves are implemented by the European Banking Authority.
The country’s public sector banks are worried that how the authority defines capital reserves, money set aside for unforseen shocks, may see them exlude much of the borrowed capital they use to bolster reserves, reports The New York Times.
Such a tougher requirement would “create a danger that healthy institutions could be artificially made to appear sick,” according to Heinrich Haasis, president of the German Savings Banks Association.
The result of this would be that these banks would be required to raise more money, placing an extra burden on the German taxpayer, or else be wound down.
Both situations are currently being played out in Ireland’s troubled banking sector.
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