Any self-respecting banking conference these days will feature a German official complaining in not-too-subtle terms about the state of the industry in parts of southern Europe.
They may complain about non-performing loans, taxpayer or governmental support or sovereign debt exposure, but the main culprit, they believe, is Italy.
These are worthy criticisms. But they are used to hold up the banking union. The demands that southern Europeans get rid of an unrealistic amount of risk before asking to share any with the north only make all of Europe more vulnerable to the next crisis.
This approach also deflects attention from Germany’s own banking sector. The country’s champion Deutsche Bank has just announced another set of disappointing results. Its share price has now fallen by 46% this year, compared with 32% at crisis-stricken Italy’s leader Intesa Sanpaolo.
Other countries probably are not thrilled about the prospect of sharing the risk of Deutsche’s opaque level three assets.
NordLB’s plight is also worth considering. With it burdened by bad loans and lying on a thin capital base, analysts and journalists are now speculating about a merger with a domestic competitor. It sounds almost like Banca Carige.
Reports suggest that the state-owned bank may look to the regional government to plug its capital shortage. This might have to be carefully constructed to avoid state aid rules, just as happened in the rescue of Monte dei Paschi last year.
Let’s see how closely Germany’s hardliners are watching that one evolve.