ECB's Weber Says Raising Banks' Capital Ratios Won't Slow Economic Growth
European Central Bank Governing Council member Axel Weber said higher capital requirements for banks won’t curb economic growth.
“Recent studies, which are based on a comprehensive cost- benefit analysis, show that the path we walk on isn’t too risky,” Weber said in a speech in Frankfurt today. “Therefore, we don’t have to expect that the planned increase in capital ratios will hamper the real economy, in particular given generous transition periods.”
The Basel Committee on Banking Supervision met yesterday to discuss higher capital requirements as part of the so-called Basel III reforms aimed at making banks more resilient to future crises. Weber said he expects the new rules will be completed this weekend. Banks worldwide oppose the changes, arguing they will force them to cut lending because they won’t be able to raise enough capital to comply.
The Basel committee, which represents central banks and regulators from 27 nations and sets capital standards for banks worldwide, was asked by leaders from the Group of 20 countries to draft new rules after the worst financial crisis in 70 years pushed the global economy into a recession. The committee last month rebuffed complaints from banks, saying the impact would be “modest.”
‘National Position’
Weber, who is also president of Germany’s Bundesbank, said that while “not everyone will be able to push through their national position,” he is “confident” that the proposals will be concluded this weekend and he wants the U.S. to follow through on implementation.
“It can’t be that we’ll implement Basel in Europe and not in the U.S.,” he said.
Germany declined in July to sign up to a preliminary agreement on the rules at a meeting of central bankers and supervisors at the Bank for International Settlements in Basel, Switzerland, reserving its position until the decisions on calibration and phase-in arrangements are finalized in September.
At stake for banks is the potential need to raise as much as $375 billion in fresh capital, according to estimates by analysts at UBS AG. Banks worldwide have written down more than $1.8 trillion since the credit crisis started in 2007, according to data compiled by Bloomberg.
Deutsche Bank AG management-board member Juergen Fitschen said yesterday that new regulations will affect the “real economy” and it would be a “fatal mistake to think that regulation only affects banks.”
Weber said the new rules will “reduce the probability of individual banks failing and will represent a first line of defense against systemic crises.”
To contact the reporters on this story: Christian Vits in Frankfurt at cvits@bloomberg.net; Gabi Thesing in London at gthesing@bloomberg.net
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