“This could be a very dangerous race to the top,” Ackermann said at a conference in Frankfurt today. Markets may “punish” lenders that don’t meet capital targets soon enough, leading banks to shrink their balance sheets and cut lending, which may impact the economy, he said.
Regulators of the Basel Committee on Banking Supervision this month reached an agreement for rules that more than double capital requirements for banks, while giving them as long as eight years to comply. Deutsche Bank will fulfill all new requirements by 2013, Ackermann reiterated today, ahead of rules for lenders to have a 4.5 percent common equity within five years, and to add an additional 2.5 percent buffer by 2019.
Deutsche Bank is raising about 10.2 billion euros ($13.6 billion) in Europe’s biggest rights offer this year to acquire Deutsche Postbank AG and boost reserves. Banks shouldn’t expect that the markets will always be willing to provide them with the capital they seek, especially as dividends and profitability decline with tighter rules, Ackermann said.
Germany’s 10 biggest lenders may need about 105 billion euros in fresh capital because of new rules, the Association of German Banks said on Sept. 6.