German banks must build up buffers for worse times - Bundesbank

FRANKFURT (Reuters) - German banks have enough capital but should still build up buffers for the next economic downturn, Bundesbank director Joachim Wuermelling told Reuters.

FILE PHOTO: The sun sets behind the financial district early evening in Frankfurt, Germany, October 10, 2018. REUTERS/Kai Pfaffenbach/File Photo

Two German banks - Deutsche Bank DBKGn.DE and Nord-LB - scored in the bottom 10 in the latest round of pan-European stress tests, published earlier this month.

That added to investor concern about the two weak links among German banks, just as the euro zone’s largest economy began to slow and financial markets were in turmoil.

Wuermelling, who is responsible for banking supervision at the German central bank, did not name any firm. But “on average, we see the capital levels of German banks as quite okay,” he said in an interview.

The Bundesbank shares responsibility for overseeing German banks with the country’s financial watchdog, Bafin.

Both are part of the European Central Bank’s Single Supervisory Mechanism, created after the latest financial crisis to centralise oversight of top banks.

Nord-LB would be left with capital worth just 7.07 percent of its risky assets after three years of economic and financial stress, Deutsche with 8.14 percent, according to the results of the European Banking Authority’s latest stress tests published on Nov 2.

That leaves them among just a dozen euro zone lenders scoring below a 9 percent threshold informally set by ECB Vice President Luis De Guindos for identifying banks that need more capital to face the next crisis.

Wuermelling concurred that banks still needed to build up their defences.

“Banks should now prepare for worse times by building up adequate buffers,” he said.

Reporting By Frank Siebelt and Francesco Canepa, editing by Larry King