ECB concludes asset quality reviews of LBS Süd and Wüstenrot, no capital shortfalls

The European Central Bank (ECB) concluded asset quality reviews (AQRs) for LBS Landesbausparkasse Süd and Wüstenrot Bausparkasse AG, identifying a depletion of their Common Equity Tier 1 (CET1) capital ratios.

LBS Süd's CET1 ratio was impacted by 137 basis points, and Wüstenrot's by 98 basis points.

This largely resulted from the banks' practice of recognising credit risk only upon loan disbursement, rather than when a client becomes eligible for a 'Bauspar'-contract.

This specific issue accounted for a 109 basis point depletion for LBS Süd and 64 basis points for Wüstenrot.

Additional provisioning needs from credit file reviews contributed to the remaining impact.

Despite these adjustments, the AQR-adjusted CET1 ratios for both banks remained above their capital requirements, confirming no capital shortfall.

The ECB expects follow-up on identified weaknesses, informing ongoing supervision and the Supervisory Review and Evaluation Process.

The ECB classified both LBS Landesbausparkasse Süd and Wüstenrot Bausparkasse AG as significant institutions due to their total assets exceeding the €30 billion threshold.

This led to the ECB directly supervising Wüstenrot since January 2024 and LBS Süd since January 2025.

Supervisors conduct AQRs to review banks' asset valuations from a prudential perspective, increase transparency regarding their exposures, and assess the adequacy of their capital levels.

These specific AQRs focused on credit risk, with their results informing ongoing supervision and leading to measures to address identified weaknesses.

The findings will also be considered in the Supervisory Review and Evaluation Process.