Bundesbank: no deal on Basel III is better than a bad deal

FRANKFURT (Reuters) – New global banking rules should not raise capital requirements for lenders and need to ease the regulatory burden on smaller banks, Bundesbank board member Andreas Dombret said on Thursday, arguing that Germany would rather have no deal than a bad one.

Dombret said that a ‘one-size-fits-all’ approach in regulating banks from large international investment giants to small savings cooperatives is inappropriate, so the operational and compliance burden need to be cut for smaller firms, even if capital and liquidity requirements are non negotiable.

“The motto must be: we’d rather have no agreement in Basel than a bad one,” Dombret told a conference in Berlin, adding that a one-size-fits all approach would harm the structure of Germany’s banking system.

“The Bundesbank is particularly keen not to raise capital requirements further in the Basel III finalization process,” he added.

An international agreement on new and tougher banking rules, known as Basel III, has been repeatedly delayed, thwarting efforts by the Basel Committee of global financial regulators, which oversees U.S., European and Japanese banks, to reform rules on capital requirements and loss-absorbing buffers.

Europe and Japan oppose the reform prepared by the Basel Committee as they feel the review goes too far and increases disproportionately the capital banks must hold against risk.

The full speech in German is available here.

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