German banks get stressed out

There is something to be said for having a large and loyal domestic investor base. Throughout the crisis, German institutions have benefited from this. So although the wider credit market might view German banks generally as too risky a proposition to lend to without a guarantee, domestic support has allowed them to sell billions of euros-worth of Pfandbriefe.

All this is remarkable because in recent weeks there have been lurid reports that the true nature of the German banks’ bad debts is in excess of €800 billion – a figure that dwarfs those attributed to the much-maligned UK banking sector.

It seems unlikely that the numbers are accurate. They were leaked from a confidential BaFin report and refer, it seems, to the widest possible range of assets up for consideration for inclusion in Frankfurt’s bad bank...