ECB Said to Slash Value of German Bank Ship Loans


German shipping lenders each saw their assets devalued by as much as 18 percent in the European Central Bank’s inspection of the area’s biggest banks, according to a senior executive with knowledge of the procedure.

The discount on loans in the asset quality review may force banks to raise capital, jeopardizing their ability to generate new business, said the manager, who declined to be identified as the information isn’t public yet.

Commerzbank AG (CBK), HSH Nordbank AG and Norddeutsche Landesbank Girozentrale are among the world’s top shipping lenders. Loans have soured with a glut in the container vessel market depressing transport prices. HSH Nordbank, the world’s biggest shipping lender, had 20 billion euros ($25.2 billion) in shipping debt at the end of June, Norddeutsche Landesbank 16.2 billion euros and Commerzbank 13 billion euros, according to company presentations.

To value shipping loans, the ECB applied a model approved by auditors and German regulators and deducted 18 percent from the outcome, the bank manager said. The discount rate may be lower depending on the share of shipping loans in the overall credit portfolio of the banks. Commerzbank, Norddeutsche Landesbank and HSH Nordbank declined to comment.

“One of the explicit aims of the comprehensive assessment is to create a level playing field between banks from 19 countries and, through peer reviews and strict quality control, make the banks as comparable as possible,´´ the ECB said in an e-mailed statement.

The 130 banks taking part in the ECB review, which also includes a test of their ability to absorb economic blows, are receiving preliminary results today and are asked to consent to their final publication on Sunday. To pass, banks must prove they can maintain a ratio of common equity Tier 1, a measure of a bank’s ability to absorb losses, to risk-weighted assets of 8 percent under current conditions and 5.5 percent under a simulated slump.

Source from : Bloomberg