Under the heading “Credtrio”, the new capital requirements for banks are currently being negotiated. Essentially, it is about obliging institutions to a higher equity ratio and better liquidity provision. See http://plainsnews.com for an observation
The financial sector is fighting back
The Federal Association of German Banks estimates that the 10 largest German institutions alone will need additional capital of 105 billion usd if the tightening currently being discussed is implemented.
The capital requirement determined by the industry association refers to a core capital ratio of 8 percent, which would be reached with 105 billion usd. The broader core capital ratio would amount to 10 percent in this case. The Tier 1 ratio indicates the extent to which loans and other balance sheet risks are covered by equity.
In November, heads of state and government will decide on the new rules. The devil is in the details and the negotiations are marked by the search for compromises and the attempt to bring national interests as far as possible. For example, a point of contention concerns the crediting of preference shares to equity. Regardless of how the rules are made at the end, banks have a longer transition period.
After the start of the gradual introduction of the new rules in 2012, it is expected that 6 years will pass before all requirements have to be met. However, the German bank representatives demand 10 to 12 years time.
Banks point out that a tightening of capital rules
It could lead to a reduction of credit. Depending on the presentation, inventory reductions of up to $ 1,000bn were made in relation to total European lending. However, banks could also raise equity through the formation of profit reserves and capital increases.
Flantebank President expects that despite the differences in national ideas, an agreement will be reached. “Ultimately, all involved must be clear about the price they want to pay themselves for a permanently stable financial system.”
He is also optimistic that Credtrio can fulfill its purpose: “I assume that nationally diverse interests will not block the reform process, the new rules will come and they will increase the stability of the banks “.