Correspondent's Choice

This story about European bank stress test results was published by EurActiv on 26th July 2010.

Bank stress tests were greeted with a mixture of cynicism and relief this weekend. Amid market doubts over their toughness, German banks stand accused of hiding their exposure to sovereign debt.

Six of the 14 German banks tested did not disclose their exposure to sovereign debt, one of a few key benchmarks in an exercise designed to test banks’ resilience to future economic shocks.

The US, the International Monetary Fund and markets had heaped pressure on regulators to fully disclose banks’ exposure in the tests.

Officials from Germany’s BaFin regulatory authority said the banks were not obliged to fully disclose their exposure under German law, the Financial Times reported.

Among the banks that hid their sovereign debt quotient were Deutsche Bank, Postbank, Landesbank Berlin, Hypo Real Estate, and mutual groups DZ and WGZ.

Hypo Real Estate unsurprisingly failed the test as the bank had sought a further €2 billion in state aid before the tests began.

The European Commission yesterday (25 July) also waded into the debate, urging banks that had not made known their sovereign debt exposure to do so as soon as possible.

Ahead of the tests, sources had predicted that some banks would try to conceal their exposure to sovereign debt as disclosing such information would make markets too jittery.

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