New rules to force German banks to raise 50 bln: report

18th September 2010, Comments 0 comments

Germany's top 10 banks will need to raise 50 billion euros in new capital to meet proposed new global banking rules due to go into effect in 2019, the weekly Der Spiegel reports in its Monday issue.

Citing a confidential document from the Bundesbank, Germany's central bank, the weekly said the banks should be able to raise 40 billion euros by setting aside a portion of future profits and by raising funds on the markets.

For the remaining 10 billion euros, the financial institutions will have to find "new sources of revenue, which will pose greater problems for less profitable regional banks" or Landesbanken, said Der Spiegel.

Last weekend central bankers endorsed new minimum capital requirements for international banks, known as the Basel III accord.

It stipulates that banks will have to hold common equity equivalent to at least seven percent of their assets by 2019. That is more than triple the two percent required at the moment.

Germany's seven public regional banks will face greater difficulties as they are barred from the retail banking market.

Because of that restriction, they turned to risky financial instruments that suffered great losses in the financial crisis, which left them in worse shape than some of their European rivals.

© 2010 AFP

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