WASHINGTON Germany's private banks need to prepare for further fallout from the euro zone's sovereign debt crisis, the head of Germany's BdB banking association said on Sunday.
"I don't think that banks will get around further charges regarding Greece," BdB President Andreas Schmitz told Reuters in an interview in Washington, adding that the effects of the Greek crisis were manageable if it could be contained.
"German banks could cope with an isolated insolvency of Greece. Such a scenario would not endanger their survival," Schmitz added.
"But if a wave of bankruptcies sweeps through Europe, the situation looks different; many banks would get into trouble -- and not just in Europe."
Earlier this month, Free Democratic Party leader (FDP) Philipp Roesler, Germany's economy minister, said an "orderly bankruptcy" of Greece should not be a taboo, in remarks that were criticized by Chancellor Angela Merkel and German Finance Minister Wolfgang Schaeuble.
Schmitz said that this kind of dissent only added to investors' concerns and that it was crucial that the German parliament approves the granting of new powers to the existing euro zone rescue mechanism, the European Financial Stability Facility (EFSF) in a key vote on September 29.
Merkel already faces a potential revolt on the EFSF vote from some members of parliament in her ruling coalition who are increasingly skeptical about more aid for Greece.
But Schmitz, who is also the head of Duesseldorf-based private bank HSBC Trinkaus, also warned against increasing the burden on private banks in handling Greece's rescue package.
"The 'financial system' patient has just come out of rehab. He's still unstable and shaky. There is a big risk of a relapse."
Private sector creditors agreed in July to take a 21 percent loss on Greek bonds maturing before 2020, but the loss is more likely to be 25 percent or more, Deutsche Bank (DBKGn.DE) said on Friday.
(Writing by Christoph Steitz in Frankfurt; Editing by Greg Mahlich)