Bafin chairman Jochen Sanio said the standards adopted by the agency carrying out the capital examinations lack "legitimacy."
"The EBA created its definition of capital for the stress tests "without any legal defined competence let alone legitimacy," Sanio said.
In the introduction to the German regulator’s annual report, Sanio said The European Banking Authority used a definition of capital that deviates from global rules "with consequences no-one can gauge."
The EBA lacks "clear defined corporate governance structures, which alone could guarantee process legitimacy," he said.
"This gives cause for concern in the future. It would be regretful if the European banking supervisor would be discredited right at the beginning of its work," said Sanio.
In April, an association of German public sector banks criticized the tests, saying they would put them at a disadvantage and convey false signals to the market.
Under the EBA tests, lenders won’t be allowed to count in their results some types of non- voting capital, known as silent participations, which are permitted by German bank supervisors.
