The uncertainty gripping Germany’s banks intensified Tuesday after the chief executive of one of its leading lenders issued an unusually frank warning about the troubled state of the country’s banking industry.
“We sense in the markets that the readiness of foreign banks to extend credit lines to German banks has become difficult,” said Alexander Stuhlmann, chief executive of WestLB, the state-backed Düsseldorf-based [bank].
The country’s lenders were in a “not uncritical situation”, he added. [In English, that translates to “critical”.]
The comments came only days after a second German bank, Sachsen LB, had to be rescued after falling victim to exposure to the turmoil in the global credit markets.
The remarks added to perceptions that banks in Germany were particularly vulnerable.
“This is a confidence issue – and banking is based on confidence,” said Stefan Best, bank analyst at Standard & Poor’s. “If negative sentiment builds up, this can spread to the whole sector.”
Banks were not facing a credit quality crisis and he did not believe the assets that banks held posed a risk to their stability – “but the market is very uncertain at the moment”. [Perhaps because Mr. Best’s firm was one of the rating firms that had been slapping AAA ratings on many of the debt instruments that have recently cratered?]
Mr Stuhlmann’s comments followed several attempts by politicians and the Bundesbank to play down any sense of a crisis.
Peer Steinbrueck, finance minister, said he thought bankers had the situation under control. [Anyone remember the last time a finance minister of any country said that he thought the situation was out of control? Oh, that’s right, that’s never happened.]
Axel Weber, Bundesbank [the German equivalent of the Federal Reserve] president, last week described the bail-out of IKB, another German bank, as an “isolated, institution-specific” incident.
From the Financial Times.