German banks must prepare for a wave of loan defaults this summer, says Bundesbank board member Joachim Wuermeling. In an interview with Frankfurter Allgemeine Zeitung, he said he was concerned that the credit situation could become more severe during the third quarter and that the country was already in a severe recession. While an easing of restrictions on movement and businesses was now underway, he said the situation would remain restricted until a medical solution of some type is found. “A quick an strong recovery is rather unlikely,” he said, in part because many of Germany’s biggest trading partners are also in economic difficulty. While the risks faced by German banks is still impossible to determine, as the Bundesbank’s top supervisor, Wuermeling said he believe the current level of available capital would be enough to cover the level of impairments suffered during the 2009 financial crisis. But a member of the ECB’s governing board Yves Mersch says German banks would have to confront serious challenges because they’re not making big enough profits and predicted that further consolidation of the industry will be needed.
Photo: Deutsche Bundesbank
