German central bank unveils key Basel III details

22nd October 2010, Comments 0 comments

The German central bank unveiled Friday key details of banking reforms aimed at preventing another financial crisis that would let banks use non-government bonds and securities to meet stricter cash reserve requirements.

Such securities could comprise up to 40 percent of the liquidity reserve that banks would be required to hold under new rules known collectively as Basel III, a statement said.

That held "great political importance," the Bundesbank said because it would minimise the importance of public debt in the make-up of banks' core reserves.

Non-government securities would still be subjected to a 15 percent discount from their market value when counted as part of the liquidity reserves however.

Basel III rules are to begin taking effect in 2013 and should require banks to increase their core reserves by January 2015.

The agreement was announced by Bundesbank vice president Franz-Christoph Zeitler after the Committee on Banking Supervision consulted with finance ministers of the Group of 20 industrialised and developing nations, who were meeting in Seoul.

- Dow Jones Newswires contributed to this story -

© 2010 AFP

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