Germany’s banking system is exposed to more than US$1 trillion in “toxic” or risky assets, news media in Europe’s largest economy said on Saturday citing a confidential financial watchdog report.
Within the 816 billion euro headline sum (US$1.08 trillion), 355 billion euros are held in the network of Germany’s regional state banks, the document revealed by the Suddeutsche Zeitung newspaper and the online edition of Der Spiegel magazine showed.
Another 268 billion euros is attributed to the troubled Hypo Real Estate bank, which on Friday moved closer to becoming Germany’s first nationalization since 1949.
Berlin has so far provided more than 100 billion euros’ worth of state guarantees in an effort to keep Hypo Real Estate afloat and recently passed an emergency bank nationalization law giving it the power to seize investors’ shares by force if necessary.
Private banks get off lightly in the report, with 139 billion euros at risk at the merged Commerzbank/Dresdner Bank, which has received state bailout aid of more than 18 billion euros to date.
The publication of the report was condemned by the Bafin watchdog, which said it is filing a formal complaint and warned against any “erroneous interpretation” as the German government ponders action to prop up its troubled economy ahead of September general elections.
Senior government ministers have held talks on a plan to help lenders clean up their balance sheets, possibly by allowing them to park difficult loans in their own individual mini “bad banks.” A bill is to be presented to lawmakers by the middle of next month.
On Saturday, Bundesbank chief Axel Weber warned that the figures published “do not reflect the complexity of the problem.”
German junior finance minister Jorg Asmussen said: “This latest list can hide all sorts of very different assets.”
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