Concern Mounts Over Strength Of German Banks

The chairman of Commerzbank, the third biggest publicly listed bank in Germany, yesterday told Frankfurter Allgemeine Sonntagszeitung "I do not know whether we will make profit in the full year," according to a report on FT.com. The bank, which has

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The chairman of Commerzbank, the third biggest publicly listed bank in Germany, yesterday told Frankfurter Allgemeine Sonntagszeitung: “I do not know whether we will make profit in the full year,” according to a report on FT.com.

The bank, which has already abandoned earlier results forecasts and increased loan loss provisions, is in the middle of a cost-cutting programme. Last week HVB Group announced it had made a loss in Q3, deepening the growing sense of unease about the financial strength of German banks as a whole.

Earlier this month Commerzbank’s shares tumbled amid market rumours. This prompted an investigation by the Federal Financial Supervisory Authority (BAFin) into possible market manipulation of the Commerzbank share on Wednesday, October 9, 2002 by an “external party” spreading “negative rumors” about the bank. The BAFin has explicitly stated that it had no suspicions against Commerzbank itself.

The BAFin monitors and analyses the current earnings and risk situation of German banks as a matter of routine. Regular contact is maintained with the major German banks in particular. In light of the general situation in the capital market the BAFin has increased its supervisory activities, placing even more emphasis than usual on being thoroughly informed about the forthcoming annual financial statements.

“The situation in the German banking sector is far from being critical. There is no reason whatsoever to assume that by the end of this year, German banks might fail to meet the international capital adequacy requirements. The current exaggeration in the market, especially the prevailing doubt about the liquidity of German institutions, is entirely beyond my comprehension”, said Vice President Caspari at the time.

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