Helaba fails the stress test for formal reasons
Landesbank Hessen-Thuringen (Helaba) once again failed the stress test of the European Banking Authority (EBA). The bank and the Hessian Ministry of Finance announced that the required quota of nine percent core capital had not been achieved for technical and formal reasons. The EBA came to the conclusion that Helaba was missing EUR 1.5 billion only on the basis of the assessment date. In fact, there is no further capital requirement. After all, the institute already meets all requirements. "No additional euro equity needs to be added," emphasized Helaba.
Dispute over silent participations
As in the previous bank stress test in the summer, the silent deposits of the State of Hesse amounting to 1.92 billion euros form the core of the problem. In the summer, the EBA did not recognize these financial investments without voting rights as hard core capital. Helaba would have failed the stress test at the time, but forbade the supervisory authority to publish its results due to the dispute over the silent participations.
As a consequence of the stress test in the summer, the Hessian state government promised to convert its silent participations into core core capital. This will be legally binding by December 30th. "We met all the requirements of the EBA and strengthened Helaba’s equity base by adjusting our silent participations," said Hesse’s Finance Minister Thomas Schafer.
Hessen criticizes banking supervision
He reacted with astonishment to the decision of the banking regulator. The amended participation agreements between the bank and the state have been with the authorities for several weeks. Last week the EU Commission gave its consent. In the opinion of the banking supervisors, however, it was too late to book the previous silent participations as hard core capital as of September 30th. If this had happened, the core capital ratio would be 9.8 percent according to the Landesbank. "Helaba is and will remain a very healthy institute," emphasized Schafer. And at the end of October, the EBA also let the bank know that there was no need for recapitalization. "To announce the opposite on an unchanged factual basis is in any case no contribution to increasing the reputation of the EBA as a serious player in the crisis," he criticized.
Large banks in the euro area will have to increase their core capital to nine percent by mid-2012. With its new investigation, the banking supervisory authority wants to check how much money individual banks are still lacking in order to reach this mark. The EBA plans to publish the results later this week.