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[FRANKFURT] German banks are likely to face higher capital buffers as a result of a supervisory review process due to conclude in the coming weeks, the head of the country's financial watchdog Bafin said.
The supervisory review and evaluation process (SREP) being carried out by the ECB and national banking supervisors uses a broader methodology than the asset quality review carried out last year, before the ECB took over responsibility for supervising the euro zone's 120 largest banks, Bafin President Felix Hufeld told Reuters. "The SREP takes a broader spectrum of risks into account and that must be reflected in the result," Mr Hufeld said in an interview on the margins of a banking conference in Frankfurt.
This would likely be reflected in higher capital demands on lenders but it was unclear at the moment if it would prompt actual capital raising by banks, he said.
Mr Hufeld also said he expected the watchdog's probe into possible manipulation in the foreign currency market - focused primarily on the dollar and euro - to conclude in the next couple of months.
International regulators have been looking at possible forex manipulation by a raft of banks, including Germany's largest lender, Deutsche Bank.
Deutsche Bank declined comment on Wednesday. It had said earlier this year it expected no big hit from the forex probe.
Bafin had uncovered bank behaviour that it previously would have thought unlikely in the case, Mr Hufeld said. "There have been violations (of rules)," he said. "Naturally, this will lead to an evaluation process and discussions with the banks involved," Mr Hufeld said.