Tough Standards

Tough StandardsNew York Times reported that German banks’ conditions are getting critical. Why? It has also been conveyed that authorities of German institutions calculate the trouble that high standards for funds would bring to meet their requirements.

The European Banking Authority which is in charge of giving the stress tests will be announcing how it will classify capital reserves which is the money that banks set aside for coming tragedies. Representatives from German banks and public sectors insist that even if they think that the institutions that they are in are healthy, they must be required to exclude from their funds the borrowed capitals they use. This is the fear of most German banks since the things that they will fail this stress test making their financial difficulties obvious to the world. When things get worse, the European Banking Authority might ask these endangered banks to raise more money or lie low in their operations, which will greatly affect their standing and business and would greatly affect the tax payers and those who have deposited their money in these banks since these are all government-owned, particularly the Landesbanks. Though there are rumors about these problems taking place, the public is not really full aware of what is happening and this is what they are complaining about. Since the test will be held in June, Landesbanks are now looking for ways on how to save themselves to prove they’re able enough to withstand any economic problem that they will be facing in the future. Seven Landesbanks were able to pass the standard test that was given July of last year but in recent surveys, these banks fail to keep the standards since the European Banking Authority was new to the idea and was too lenient last year. Because of this, they have promised to be stricter and look through all possible loopholes to restore investors as they confidently revive the health of the banking system in Germany.

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