FRANKFURT Jan 16 German banks may face a capital shortfall in stress tests of the sector over the coming months, the head of the country's financial market watchdog Bafin said on Thursday.
"Depending on how the scenarios and assumptions are set up, the (stress) test could unearth additional capital needs at some banks," the financial regulator's President Elke Koenig told a Bafin New Year's reception, according to the text of a speech.
She added, however, that she was confident the European Central Bank's asset quality review, which will precede the stress tests, held little scope for unpleasant surprises.
Both assessments of banks' health were essential to allow a proper start to the ECB's takeover of banking supervision in the euro area from November, she said.
"Both must be stringent but we have to proceed with a sense of proportion," she said. (Reporting by Jonathan Gould and Eva Taylor; Editing by Ludwig Burger)