GERMANY’S TOP 10 banks will have to raise as much as €105 billion of fresh capital under a global regulatory overhaul, the country’s banking industry has warned, in a last-ditch effort to change tough new rules.
The so-called Basel III rules would stymie the banks’ ability to function, curtail lending and undermine Europe’s biggest economy, said the Bundesverband deutscher Banken, representing private sector banks.
The warning yesterday came a day ahead of a meeting of the Basel Committee on Banking Supervision, which is putting the finishing touches to rules governing the capital and liquidity requirements for banks.
In July, when a draft was published, Germany was alone among the 27 countries represented in saying it could not agree to tighter definitions of capital without knowing the headline ratios.
Today’s meeting, which will be rubber-stamped by the group of governors and heads of supervision on Sunday, is expected to pin down the ratios.
Bankers say the minimum tier one capital ratio, the most common measure of a bank’s fiscal strength, is likely to be raised from 4 per cent to 6-8 per cent. The core tier one ratio, which strips out all but the highest quality capital, is set to rise from 2 per cent to about 4 per cent.
Banks will also have to maintain so-called additional buffers, in good times running at up to three percentage points, with a further one to two percentage points required of those deemed systemically important.
The reforms are particularly contentious for German banks because public sector groups, in particular, have relied strongly on instruments called silent participations, which are not loss-absorbing, making them unsuitable as top-quality capital in the eyes of the Basel committee. – (Copyright The Financial Times Limited 2010)
