Germany says bank stress tests should be postponed

FRANKFURT: German authorities said Thursday that European bank stress tests should be postponed by two weeks to allow banks to prepare for them.

"Considering delays in the definition of important parameters of the stress tests," the central bank and financial market regulator BaFin asked in a joint statement that the deadline for filing documents be pushed back by two weeks. The European Banking Authority is to publish on Friday the list of financial institutions concerned by the tests, along with a crucial definition of shareholders equity used to determine if banks pass or fail. Banks must know how to calculate core Tier 1 capital, which measures how well equipped they are to withstand major losses, before they can establish  reports that are currently due at the end of the month.

The European bank tests have not been well received in Germany, with some state-owned regional banks concerned they will not be allowed to count so-called silent participations by local governments as shareholders equity. Those participations mean the governments have injected money into the banks but do not hold voting rights normally associated with the investments. If it cannot count such funding, the western Hesse-based Helaba bank might boycott the tests, regional economy minister Dieter Posch warned this week. Shareholders in Nord/LB, a regional bank based in Lower Saxony, slammed the new tests as "totally unprofessional" and complained that banks only knew the  criteria "at the very last moment," giving them little time to prepare. The new tests follow a widely discredited exercise carried out in mid 2010.