Of Special Interest
- Financial wellness affects half of peoples’ mental or physical health, finds report
- Study finds traditional financial institutions embrace Fintech disruption
- Grass is greener for environmentally friendly businesses, finds Barclays
- Prospective homeowners would consider a 40-year mortgage to escape renting, finds Santander
- Millennials’ needs are changing the face of banking industry, says new report
- FS is putting consumer data at risk by failing to protect mobile apps, says Arxan
- A lack of belief in their ability holds 28% women back in work, says Cambridge & Counties
- ‘Which?’ reveals Scotland has lost over a third of its bank branches in eight years
- Next downturn unlikely to be as bad as 2008, according to S&P
- FCA reveals findings from first cryptoassets consumer research
- US consumers favour single mobile app for banking and payments
- Banks suffering major IT shutdowns every day, ‘Which?’ reveals
- The US will be a key offshore centre in 2019, says GlobalData
- Debit industry changes markedly in 10 years of the Debit Issuer Study
- UK's ‘Big Five’ face ‘too big to compete’ as small challengers secure stellar returns
- Banks as vulnerable now as before crash, says new study
- Leverage ratio a constant conundrum for European and US banks, says SNL
15th July 2011
Helaba says has withdrawn from European stress test
In an interesting twist to the European Stress test process Landesbank Hessen-Thueringen believes it can prevent the European Banking Authority from publishing the capital levels for the bank and says that it has withdrawn from the process.
Under the EBA's capital definitions the bank will fall below the 5% core capital threshold required - and the bank freely admits this. It argues that the EBA should accept silent participation, a form of non-voting equity capital still in common use within Germany. If silent participation was allowed the bank states that its core capital would be 6.8%. The state of Hesse, a major shareholder of the bank is said to support the bank's decision.
Many German banks complained about the exclusion of silent participation capital from this year's stress test and it is understood that the federal authorities argued the case strongly for its inclusion. Silent Participation is not recognised as Core Tier 1 capital under Basel III however and the EBA is seeking to use Basel III standards as it brings a common capital measure across Europe. Whilst silent participation may in some cases be argued as having a conditional element making it less good than common equity the state of Hesse made a 'public and binding' declaration backing its silent participation. This declaration might make you wonder why the state could not have simply converted the silent participation to ordinary capital. The measurement terms have been known for some considerable time.
Should Helaba's decision to exit the process be considered invalid and it be deemed to have failed the stress test it would then fall on the German Federal authorities to agree a remedial plan. The remedy might be that in the fullness of time the state of Hesse convert its capital to common equity. The incident, which touches on the farcical, will be used by those already doubtful of the rigour of the European stress test as evidence that their fears are well founded.