Europhiles like to portray German banks as paragons of prudence, and German financial regulation as a model to be emulated. Colm McCarthy skewers this laughable nonsense:
German banks remain over-leveraged and undercapitalised:The publicly owned Landesbanks in Germany have been a disaster area – West Deutsche Landesbank, based in Dusseldorf, has had to be wound down and several others have incurred horrendous losses and have been closed, bailed out or restructured. The German bank regulator, called Bafin, has failed dismally and the popular perception of Germany as a model of financial caution for the rest of Europe is well wide of the mark.
The US has already bailed out European banks once:Deutsche Bank had €2,012.3bn in assets but just €54.4bn in shareholder equity, 2.7 per cent of assets. Put another way, Deutsche Bank had a leverage ratio of 37 times, that is, its assets were 37 times its capital...
Deutsche is Germany's largest bank and one of the largest in the world. The bank's balance sheet equals about 56 per cent of Germany's GDP. If Deutsche ever got into trouble, even the German treasury would struggle to bail it out.
The US wants US subsidiaries of European banks to come up with more capital to cover potential losses:The US taxpayer has already done a big favour for Europe when the government bailed out US financial institutions whose failure would have bankrupted large swathes of the European banking system. US regulators are understandably anxious to avoid any repetition.
All of which is a far cry from the fantasies peddled by the kneejerk europhiles of p.ie ....US regulators, who want big European banks operating in the US to put dedicated risk capital into their large US subsidiaries. The US arm of Deutsche currently has no equity at all and the US authorities are naturally concerned about this.
Europe must fix its broken banks - Independent.ie