MNI BRIEF: German Banks Face Balance Sheet Stresses - Buba

Rising interest rates mean German banks are increasingly liquidating their hidden reserves for securities, while interest expenditure is likely to rise above the level of interest income, the Bundesbank executive board member Joachim Wuermeling said in a speech Tuesday, as he warned that risks could also come from loans to companies and households.

Although German banks remain well-capitalised, "it is indeed the case that hidden reserves have contracted sharply in the year to date, So if securities prices continue to fall, this could increasingly have a bearing on banks’ income statements, Wuermeling said,.

Particular problems could arise from borrowers who locked in low interest rates on their mortgages in the short-term, only to find themselves faced with much higher debt repayments, Wuermeling said - echoing recent UK concerns.