Association of German Banks: Results of the stress test are arbitrary

8 December 2011 - "The stress test has not helped to stabilise the markets," said Michael Kemmer, General Manager of the Association of German Banks, when commenting on today's publication of the results by the European Banking Authority (EBA). "The opposite is the case. The arbitrarily set requirement to hold 9 per cent core Tier 1 capital while at the same time taking account of the risks arising from European government bonds is very difficult to understand." This was tantamount to setting aside capital twice to cover possible risks. "The lengthy and chaotic-seeming process has, in addition, strengthened the impression that any result is possible," continued Kemmer. A particular problem was the fact that calculation methods and criteria had repeatedly been changed. The EBA had lost credibility as a result.

The markets had been highly unsettled by the EBA, Kemmer went on to say. The results would tend to have a procyclical effect, thus increasing tension in the financial markets. "Adverse consequences - including for the growth of European economies - cannot be ruled out," Kemmer fears. He said German banks had built up massive amounts of capital in recent years and were anything but undercapitalised.

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