"I think the German banking market is still vulnerable," said Raimund Roeseler, now in charge of banking oversight at the financial markets regulator BaFin.

"There is no reason to rest on our laurels," he said, even though most German banks tested during a European Union exercise were deemed to have enough capital to weather a fresh crisis the financial sector.

One German bank, the state-owned regional lender Helaba, refused to accept the stress test results, claiming the European Banking Authority had not considered changes to so-called hybrid capital provided by regional authorities.

Roeseler warned that "it is possible that the next crisis emerges in a sector that we have not examined closely," and underscored "problematic cases among the Landesbanken," or regional German banks.

But the regulator also took a swipe at the European Commission, which has demanded that such banks sharply restructure their operations in exchange for state aid received during the 2008-09 global financial crisis.

"I worry when the Commission intervenes and demands that Landesbanken curb lending in sectors that are functioning well," Roeseler said, citing the case of HSH Nordbank with the maritime and aerospace industries in northern Germany.

He also spoke up in defence of the international ratings agencies, which were slammed for underestimating the threat from risky mortgage loans and which "today we reproach for speaking out" on the issue of excessive public debt.

Copyright AFP (Agence France-Presse), 2011