Tuesday 16 January 2018

Confusion reigns over Germany's exposure to our debt

Banks and government at odds over contradictory loan figures

Thomas Molloy

Thomas Molloy

GERMAN banks are at loggerheads with the government in Berlin this week over the thorny question of how much Irish banks owe German lenders.

No concrete figures exist to measure what Irish banks owe their foreign counterparts, which has led to a bitter dispute between Germany's largest bank and the government as well as confusion among the German public.

Chancellor Angela Merkel's spokesman Steffen Seibert said in Berlin earlier this week that Deutsche Bank was especially exposed to Ireland as he tried to explain to German voters why they will be paying for Ireland's bailout.

The comment provoked Deutsche Bank spokesman Christian Streckert to describe the statement as "defamatory" and insist that the bank was owed less than €400m by Irish banks.

Other big banks, including Commerzbank, BayernLB and WestLB, have also called their exposure to Ireland relatively minor.

The government later issued a statement admitting it does not have have any "reliable figures" about the scale of Germany's exposure to Ireland.

Figures from the Bank for International Settlements in Basel, often quoted in the Irish media, suggest Irish banks and companies owed $139bn (€104bn) to German banks in June and a further $132bn to British banks at the end of June.

While these figures come from one of the world's most respected financial regulators, they differ starkly from the figures issued by individual banks.

One reason is that it is often difficult to calculate these risks. The €400m figure quoted by Deutsche Bank included derivatives to hedge risk, according to bank spokesman Ronald Weichert.

The bank has not disclosed the gross figure. The lender said in a July presentation that it had €309m in gross exposure to central and local governments in Ireland at the end of March.

Bundesbank president Axel Weber said on Monday that estimates for bank exposure to Ireland were "exaggerated".

Mr Weber, who is tipped to become the next head of the European Central Bank, said much of the German banks' exposure to Ireland involved companies in the International Financial Services Centre that were Irish subsidiaries of German banks.

Mr Weber believes the real exposure of German banks is closer to €30bn.


Even within Deutsche Bank, there appears to be disagreement over the extent of the problems.

Board member Juergen Fitschen said last week that he couldn't rule out losses for investors in Irish debt.

"You can't rule out anything and if it happens, it wouldn't be the end of the world," he said in an interview with German television station Deutsches Anleger Fernsehen.

"But I'm not saying that it will come to that. It would be nicer if they manage to avoid it."

He said that Germany's biggest bank was not concerned about potential writedowns on Irish investments.

Investors who sought high returns by buying Irish debt shouldn't act like they weren't aware of the risk, he added.

Irish Independent

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