GERMANY:NATIONALISED PROPERTY lender Hypo Real Estate (HRE) is the only one of 14 German banks to fail the EU stress test.

That the country’s debt-laden state banks or Landesbanken passed the test, demonstrating a 6 per cent or greater capital ratio, raised questions in Germany yesterday about the merits of the EU-wide survey.

“HRE is the only German bank to fall short of the 6 per cent tier one capital ratio in the most severe stress scenario,” said a statement by the Bundesbank and Soffin, the finance market stabilisation fund.

After its Dublin-based subsidiary Depfa was unable to raise funds in 2008, the Munich-based lender was rescued from ruin by over €100 billion in German state guarantees and loans before full nationalisation last year.

“An immediate need for capital would arise only if the hypothetical stress scenario actually did materialise,” added the German statement, pointing out that the lender met the minimum 4 per cent capital ratio level “even in the most severe stress scenario”.

Germany’s finance ministry said the results did not take into account HRE’s planned “shift of assets in the second half of 2010 to a clearing institute and a further strengthening of capital”.

The German test was topped by Berlin’s Landesbank (LBB) with 11.3 per cent, followed by Deutsche Bank and HSH Nordbank with 10.3 per cent and 9.9 per cent respectively. Germany’s second-largest lender Commerzbank, currently in partial state control, measured 9.3 per cent.

“Measured by this criterion, the German banking system has shown itself to be robust and proved its resilience even under very pessimistic assumptions,” said the Bundesbank statement.

Postbank, once the darling of Germany’s financial scene, scraped through with 6.7 per cent, with NordLB Landesbank 0.3 per cent behind at 6.4 per cent.

“If a bank nears the 6 per cent cut-off point, that will be judged like a fail,” said one unnamed high-ranking banker to the Süddeutsche Zeitung newspaper.

Finance minister Wolfgang Schäuble described the results as “a positive signal” but admitted they revealed “a need to achieve further consolidation in the Landesbank sector”.

Germany’s Landesbanks, the financial houses of Germany’s federal states, have struggled to develop a new business model since the EU stripped them of advantages they enjoyed as state lenders over private competitors.

Most have run up multi-billion debts in financial market speculation and in financing pet projects of political bosses.