Reuters: Regulatory News: UPDATE 1-German watchdogs warn U.S. on go-it-alone bank rules

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UPDATE 1-German watchdogs warn U.S. on go-it-alone bank rules May 28th 2013, 10:53 Tue May 28, 2013 6:53am EDT * Bafin in intensive talks with U.S. regulators * U.S. move runs counter to agreed G-20 approach * German bank capital needs have declined By Jonathan Gould and Andreas Kröner FRANKFURT/BONN, May 28 (Reuters) - Germany's financial watchdogs on Tuesday warned against unilateral action by national regulators, as the United States considers tougher capital rules for foreign banks. Markets regulator Bafin said it was in intense and constructive talks with its U.S. counterparts about their plans to tighten oversight of foreign lenders, including requiring them to hold bigger capital and liquidity buffers against the risk of a financial market downturn. That move would be "a step in the wrong direction," Bafin President Elke Koenig told the regulator's annual news conference in Bonn. Forcing banks to build up their capital and liquidity buffers has been a central plank of regulators' response to the 2007-2009 financial crisis, which saw a breakdown of inter-bank lending that spread problems in widening circles to national governments and the wider economy. International regulators agreed to introduce stricter bank safety rules by the end of 2018 to improve their capital cushions, a way to help absorb potential losses in a crisis. Bundesbank Vice President Sabine Lautenschlaeger said unilateral action by U.S. regulators would make managing big banks more difficult and also make it harder to wind down globally active banks that run into trouble. "National special rules don't fit in a world of internationally active banks," she told a banking conference organised by the Bundesbank in Frankfurt. German banks had made progress in raising their own capital buffers, the watchdogs said. Bafin calculated that major lenders in Europe's largest economy still needed an extra 14 billion euros ($18.1 billion) in capital to fulfil stricter bank safety rules. But thanks to capital increases and the selling down of risky assets, German lenders have reduced their capital shortfall from 32 billion euros and now have regulatory core capital of between 10 percent and 18 percent of risk-weighted assets. Banks need to have a core tier one capital ratio of 7 percent by 2019. The rules, known as the Basel III accord, are being phased in over six years from January 2013. The Basel rules were the world's main regulatory response to the 2007-09 financial crisis that forced governments to rescue undercapitalised lenders. Link this Share this Digg this Email Reprints

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