“Banks have an adequate buffer” Interview published in Frankfurter Allgemeine Sonntagszeitung
04.11.2018 | Joachim Wuermeling
Interview with Joachim Wuermeling conducted by Georg Meck.
Translation: Deutsche Bundesbank
Mr Wuermeling, how shaky are Europe’s banks?
All the banks that took part in the stress test are well equipped to face tougher times. They have enough capital to meet the minimum requirements – even in the event of a global economic downturn.
Why do German banks perform so poorly?
I wouldn't say that’s the case. The performance of German banks was average compared to all the institutions tested, and was far better than in the last stress test two years ago. This is remarkable when you consider that the scenario applied to Germany, as an export-focused country, was much more severe this time round. I therefore find the results quite reassuring – although action still needs to be taken.
Deutsche Bank is one of the lowest-ranked institutions.
I can’t comment on the results of individual institutions. As a general rule, the more international a bank’s activities, the tougher the stress test. This is clear from all the results.
Should German savers be worried?
No, absolutely not. Even a severe economic downturn such as the one assumed in the scenario would not trigger a new financial crisis; banks have enough capital to provide a buffer.
What direct consequences does the stress test have for the banks?
As supervisors, we look at the overall situation of the banks. The stress test is just one of the components. That said, the worse banks have performed, the more capital we will require them to hold. This is how we increase their resilience.
The stress test also shows that German banks have a problem when it comes to profitability.
You’re right – profitability does need to be improved. In this sense, the stress test doesn’t give banks any grounds for complacency, especially given that global risks aren’t getting any smaller. Consolidation is starting to take place in the banking industry, and we will see that process continue.
If Deutsche Bank and Commerzbank merge, as many are speculating, is this in the interests of banking supervision? Or will we then run the risk of having a bank so large that it is even harder to save?
A bank’s resilience does not depend on its size, but on other factors. That’s one of the lessons we learned from the financial crisis. On the other hand, size can cut down on costs, which is an advantage from a bank’s perspective – even if it is only one argument. At the end of the day, it is up to the owners of the banks to make this kind of decision.
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