The German banks first to profit from public subsidies of trillions

Seminar organised by European Ombudsman Nikiforos Diamandouros: International Right to Know Day - Transparency and accountability in international development banks, (European Parliament photographic library).

Seminar organised by European Ombudsman Nikiforos Diamandouros: International Right to Know Day – Transparency and accountability in international development banks, (European Parliament photographic library).

The German banks in the north of the country seem to face grave problems. Yesterday the European Commission was forced to approve more state aid to Norddeutsche Landesbank Girozentrale (NORD/LB). This is a German Landesbank, one of the largest commercial banks in the country, which serves as central institution to savings banks in the German Länder of Niedersachsen, Sachsen-Anhalt and Mecklenburg-Vorpommern. According to the European Commission NORD/LB has received in 2011 and 2012 recapitalisation aid from the German taxpayers totalling to €2.6 billion in order to strengthen its core capital. Not to forget that Moody’s, the US rating agency, has downgraded all the major 10 German Landesbanks towards the end of 2011.

More problems

NORD/LB however is not the only German bank in the north of the country having problems. HSH Nordbank, with its major shareholders being northern German federal states, has already asked and given taxpayers’ support to the tune of €1.3 billion. There is no end though to the problems of the German lenders. The largest one, the ‘mighty’ Deutsche Bank, has been boosting for years that it doesn’t need more capital. Last May it was forced to proceed to a capital increase with deplorable results. It raised around €2bn, just peanuts for this giant.

It’s not only the land problems haunting the German banks. Sea water floods are also threatening them. On 21 February 2013 the Sting writer Elias Lacon wrote: “Earlier this week, Dr Andreas Dombret, Member of the Executive Board of the Deutsche Bundesbank (German national central bank), responsible for financial stability and risk controlling, delivered an open lecture in Hamburg, entitled “In the year 2013 – Challenges from a financial stability perspective” .

Apart from the burning questions he posed for a number of Eurozone countries’ sovereign debt, he went as far as to question the stability of the commercial banking system of Germany. The total exposure of Germany’s banking system to the shipping industry was estimated by Dombret at €100 billion. Understandably, if the crisis in the maritime industry continues, those banks will be in trouble.

But let’s return to dry land. The state controlled German Landesbanks account for almost one-quarter of the country’s banking system. This is much more than Deutsche Bank and Commerzbank, the two largest private banks of the country. The problem is that the largest of the Landersbanks that is the NORD/LB, HSH Nordbank, HELABA, BAYERN/LB and Landesbank Baden-Württemberg still have large exposure to toxic assets in the US and in the Eurozone.

The problems of NORD/LB are characteristic of the sector. In July 2012 the Commission approved a restructuring plan for it, which included dividend and coupon payment ban for the years 2012 and 2013. This was actually a restructuring programme, obliging the bank to accumulate enough profits in order to strengthen its capital position. The bank however didn’t apply its own part of the deal. It paid coupons without informing the Commission.

German banks are untouchable

This is a German bank though and the Commission had to find a way not to revoke the approval of the restructuring plan. Negotiations must have followed and Germany accepted some more commitments, just to give the Commission some ground to base an approval of the new terms of the programme as the bank wanted. In return the lender accepted to further reduce its risky ‘investments’ and prolong the dividend ban period until the end of 2016.

The whole process is only superficially similar to the restructuring programmes applied to entire Eurozone countries, like the over indebted Greece. In the case of banks however austerity is restricted to the ban of dividend payments in return to government capital injections. The banks are also receiving zero cost liquidity from the European Central Bank. This almost zero interest rate liquidity allows lenders to make hefty profits. They lend out those funds at an average rate of around 10%, thus usurping all the interest.

In this way the banks profit from both sources. The government capital injections and the ECB liquidity supply. That’s why the American banks recapitalised themselves so quickly after the credit crunch of 2008. Now it’s the turn of Eurozone banks to do the same, with the German lenders spearheading the operation. It has to be reminded that, according to Commission’s estimates, the Eurozone banks have already received public aid amounting to €4.5 trillion. And all of it for free.

At the same time Greece, Ireland, Spain and Portugal are obliged to borrow more in order to hand out more funds for free to their own banks. Only the Greek banks have received state aid of €48.5 bn at the expense of the impoverished Greek taxpayer. No wonder why unemployment has reached 28% in this country. The same is true, in varying degrees, for Spain, Ireland and Portugal. Even the German taxpayer is unduly burdened with the huge subsidies accorded to the country’s banks. Last but not least, all Eurozone citizens are burdened by the free trillions handed out by the ECB to bankers.

the sting Milestones

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

Closing the gaps in accelerating women’s rights:the role of medical students

COP21 Breaking News: China has promised to cut emissions from its coal power plants by 60% by 2020

EU Commission spends billions without achieving targets


The vital role played by logistics during humanitarian crises

Will CETA be implemented after eight long years or it will be vetoed by the EU citizen?

A new global platform to unleash entrepreneurs on the world’s toughest problems

EP launches Caruana Galizia Prize for Journalism on anniversary of her murder

EU citizens want more competences for the EU to deal with crises like COVID-19

COP25: ‘Signals of hope’ multiplying in face of global climate crisis, insists UN chief Guterres

Canada needs to increase foreign aid flows in line with its renewed engagement

Data show EU Economy in a stubbornly subdued state

Why are so few women buying into Bitcoin?

3 cognitive biases perpetuating racism at work – and how to overcome them

The EU will always have a stable partner in Montenegro, says President Đukanović

The jobs forecast is unsettled. It’s time for a reskilling revolution

This one small change could transform education for millions

Google prepares to final EU judgement over Android antitrust case

Greferendum: the biggest political gaffe in western modern history to tear Europe apart? #Grexit #Graccident

6 young leaders who are improving the state of the world on International Youth Day

Human rights chief calls for international probe on Venezuela, following ‘shocking accounts of extrajudicial killings’

Protests, violence in Haiti prompts international call for ‘realistic and lasting solutions’ to crisis

UN working ‘intensively’ to stop Ebola in eastern DR Congo, following second case in major border town

Oslo leads the way in ‘Breathe Life’ campaign for cleaner cities in climate change era

Bureaucracy in the member states again the obstacle for long due strong European Hedge Funds

London is becoming the world’s first National Park City

1 in 7 people would choose not to fly because of climate change

Libyan national conference postponed, nearly 500,000 children at ‘direct risk’ from fighting around Tripoli

Industrial clusters using green hydrogen can drive clean energy transition in Europe and China

UN mobilizes in Rohingya camps to support babies born of rape; young mothers face stigma

The crucial need to prioritise palliative care in Universal Health Care

Could 2021 be a turning point for forests and climate change?

$675 million appeal to stop coronavirus in its tracks, as deaths rise

What wealth managers can learn from family dynamics

How’s Life? reveals improvements in well-being but persistent inequalities

The challenge of maintaining interest in Primary Health Care in medical students

Antitrust: Commission imposes interim measures on Broadcom in TV and modem chipset markets

Heart attacks and strokes are more common on high pollution days, data shows

Governments can fight corruption by joining the digital payment revolution

These are the benefits of learning a second language

Tax crimes: MEPs want EU financial police force and financial intelligence unit

State aid: Commission approves € 1.6 billion Polish scheme to compensate companies for damages suffered due to coronavirus outbreak and provide liquidity support

Science is ‘key’ to pushing forward the 2030 Agenda, UN development forum told

Greece to stay in the euro area but the cost to its people remains elusive

India’s future as a world power depends on 4 key relationships

Trade MEPs promise thorough scrutiny of the EU-UK agreement

How Asia could be the winner in the US and China’s Belt and Road race

Africa’s shrinking lake shows the impact of climate change on women and indigenous people

Quarantine: A mental health guide for every mood

European Commission kicks off major EU trade policy review

New Eurobarometer survey shows: The majority of Europeans think the EU should propose additional measures to address air quality problems

This mobile laundry gives homeless people free showers and washes their clothes

Italy’s dilemma after Merkel-Hollande agreed loose banking union

EU budget: Commission proposes major funding increase for stronger borders and migration

As the Universal Declaration of Human Rights turns 70 – is it time for a new approach?

UN policewoman recognized for ‘speaking up and speaking out’ on behalf of the vulnerable

Can Greece’s devastating economy deal with the migration crisis?

Afghanistan: UN envoy urges further extension of ceasefire with Taliban, as Eid ul-Fitr gets underway

The European reaction to the neo-fascist wind

Computer skills are crucial for children – in lockdown and in life

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s