German banks are worried the latest round of European banking stress tests in the may actually force banks to seek government aid and taxpayer support, according to The New York Times.
The issue testing Germany’s banks is that many use alternative sources of capital to stand in for reserves. Test rules may not allow this to be done, according to The Times.
It’s not the country’s biggest players, like Deutsche Bank, threatened by these new rules. Rather, Landesbanks, which are often partially controlled by local governments, could be in trouble.
Last month, Absolute Return Partners pointed out that German Landesbanks, along with Spanish cajas and Austrian banks, were some of the weakest in the EU.
The news comes on the back of Ireland’s most recent stress tests, which revealed that banks there would need another €24 billion in capital.
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