Commerzbank AG, Germany’s second-biggest bank, sees closer cooperation between banks and insurers as stricter capital rules make long-term lending less attractive for banks.
“One cannot exclude higher capital requirements in the future,” Martin Blessing, chief executive officer of the Frankfurt-based lender, said at an event in Frankfurt today. “Nobody knows how much capital a bank needs in 19 years for a certain loan. Insurers have long-term liabilities and assets and are better suited for long-term financing.”
Banks face stricter rules, known as Basel III, that are meant to make the financial system safer by forcing lenders to hold more capital against certain loans, including those for shipping, real estate and long-running projects. Commerzbank, once the world’s third-largest ship lender and biggest European real estate financier, announced plans in June to exit those businesses.
Introduction of the tougher capital standards coincides with Europe’s debt crisis, which has led to slower economic growth and a decline in client trading. The European Central Bank announced plans this month to tackle the crisis with a program to buy an unlimited amount of short-dated sovereign debt from countries that seek assistance and agree to conditions.
While the ECB’s announcement led to a rally in stocks and a decline in bond yields in Spain and Italy, the debt crisis by no means is over, Blessing said. What is needed is further political integration and fiscal union and that will take time, he said.
The ECB and the European Stability Mechanism, a fund to provide assistance to euro area countries in financial difficulty, have to buy time for politicians to implement those measures, Blessing said. It will take a long time before cross-border capital flows reach pre-crisis levels and investors trust in the survival of the euro, Blessing said.
Commerzbank, unlike German savings banks, supports the idea of a European banking union. “If a bank is operating in different countries, it has to work with all kinds of different regulators, so it would be better to just speak with one supervisor,” Blessing said.