New bank standards to be phased in from 2013: bankers

8th September 2010, Comments 0 comments

Stricter international banking standards should be ready by 2013, sooner than expected, but should not affect the wider economy, German central bank leaders said Wednesday.

A compromise was reached "on fundamental issues" during a meeting of the Basel Committee on Banking Supervision on Tuesday, Bundesbank vice president Franz-Christoph Zeitler said in a statement.

Central bank governors and financial market regulators are to meet again on Sunday in the Swiss city to define a minimum level of capital and cash reserves that banks will have to maintain to avoid another crisis.

The need for reinforced banking standards was made clear by the collapse of the US investment bank Lehman Brothers in September 2008.

"Since the beginning we have sought to ensure a balance" between reinforcing the stability of the international financial system without stemming credit flows to the wider economy, Zeitler said.

The solution may lie in "higher levels of core capital" along with a "capital cushion," measures that would be progressively introduced starting in 2013, he added.

Stricter banking standards for capital and cash reserves will not burden economic growth, German central bank president Axel Weber added.

Weber, an influential member of the European Central Bank governing council, told a banking forum here that reinforcing capital standards "should not make the real economy suffer, as long as there are generous transition periods."

But the head of the German savings bank association, Heinrich Haasis, said that the talks on bank reserves could lead to total reserve requirements of up to 16 percent of a bank's assets, "more than double" the current level.

The Swiss-based Bank for International Settlements (BIS), the so-called central bank of central banks, is drafting tougher capital and liquidity rules to try and prevent another international financial crisis.

The Basel committee is to release more details on the proposed requirements next week, and Weber said the task of drawing up new rules as requested by the Group of 20 developed and developing nations by November was "on track."

He argued that international interests should take priority over national ones, saying: "Stability has a price ... the actors should determine the price they are willing to pay for a financial system with long-term stability."

© 2010 AFP

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