Germany says lending not as risk from 'Basel III'

13th September 2010, Comments 0 comments

Germany welcomed on Monday proposed new international capital rules for banks and said that lending would not be restricted, including by the country's stricken public banking sector.

"We don't see any threat of a credit squeeze due to these rules," finance ministry spokesman Michael Offer told reporters, calling them an "important building block" in global efforts to prevent a new financial crisis.

He added that Germany did not expect state-owned regional lenders, known as Landesbanken, to be overburdened by the new rules unveiled on Sunday raising the minimum amount of capital they have to hold against possible future losses.

Many of these public German lenders had to be bailed out with billions of euros in fresh capital and loan guarantees after the 2008-2009 financial crisis and observers fear that the new rules will find them short of money.

Public lenders in Europe's biggest economy got their fingers burnt after the removal of state guarantees declared illegal under EU rules in 2005 forced them into riskier areas of business.

Germany was reportedly among a group of nations pressing for the new "Basel III" rules, announced by the Basel Committee on Banking Supervision in Switzerland, to be watered down.

Banks have up to eight years to comply but the Association of German Public Banks (VOeB) said they did not have enough time, while the reforms were "like flying blind."

"Clearly the German delegation (in Basel) was unable to represent successfully the peculiarities of the German banking system," VOeB chairman Karl-Heinz Boos said in a statement.

"We see a danger that lending by German banks will be significantly hampered, hitting in particular Mittelstand (small and medium size) firms, who have no access to capital markets."

Boos also criticised the fact that the Basel committee stopped short of fully recognising certain types of capital held in large quantities by the Landesbank sector.

Andreas Schmitz, the head of Germany's private banking association, the BdB, told the Handelsblatt business daily that he expected the new rules to increase pressure on public lenders to merge.

His association said in a statement that it broadly welcomed the new rules, saying that although the capital requirements posed "big challenges" to banks and needed work in some areas, they were a "step in the right direction."

"The new rules are ambitious, but all in all German banks will be able to implement them -- even though this will require considerable effort," it said.

The new rules are set to be discussed at a summit of the Group of 20 (G20) leading industrialised and developing economies in South Korea in November.

-- Dow Jones Newswires contributed to this story --

© 2010 AFP

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