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Business

S&P Urges German Banks to Restructure

The international credit rating agency Standard & Poor's urged Tuesday German regional state banks, or Landesbanken, to press ahead with restructuring now that they have lost their state guarantees. "We are of the opinion that the transformation is not yet complete and that ongoing restructuring and successful implementation of agreed measures is crucial to maintain ratings," S&P wrote in a study. The rating agency suggested that the Landesbanken should boost cooperation with the powerful public-sector savings banks, or Sparkassen, that dominate high-street banking in Germany. As previously announced, S&P drastically cut the long-term credit ratings of the regional state banks following the abolition at midnight on Monday of their state guarantees. Those public guarantees had enabled the banks to refinance themselves via the capital markets at very favorable conditions and pass on the cheaper borrowing costs to their customers. The European Commission ruled in 2001 that the practice should be abolished. But in order to give the Landesbanken time to adapt, it was agreed that the state guarantees would only cease at midnight on July 18, 2005.

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