German banks are “prepared for all possible scenarios” with regard to Greece even if their exposure remains “limited”, the country’s financial watchdog BaFin said on Tuesday.
“We know to what extent German banks have invested in the bonds of the peripheral Eurozone countries,” BaFin president Elke Koenig told the organisation’s annual news conference in Bonn.
“I won’t speculate on future financial policy in Greece. But I am certain German financial institutions are in the meantime prepared for all possible scenarios,” Koenig said.
“In any case, their exposure in Greece is limited,” she insisted. As far as Portugal and Spain were concerned, “I can assure you that we and the Bundesbank are monitoring the situation very closely. It is not at all comparable to Greece. Spain is currently suffering the very specific consequences of a burst real estate bubble, and not the country’s structural over-indebtedness,” Koenig said.
For insurers, too, which had remained relatively unscathed from the recent financial crises, the long-running sovereign debt crisis “is no walk in the park,” Koenig said. Insurers, and life insurers in particular, were being hard hit by the current environment of very low interest rates, since that was making it difficult for them to meet the long-term interest guarantees made to their customers.
Traditionally, insurers and pension funds have invested in the benchmark German 10-year bonds or “Bund”, where yields are at historic lows in view of Germany’s safe-haven status in the debt crisis.
“We will have to wait and see whether insurers turn to other forms of investment so as to be able to offer a better return with an acceptable level of risk,” Koenig said.
Frankfurt, June 5, 2012 (AFP)
