Basel’s Bank Capital Rule Revamp Said to Split German Lawmakers

(Bloomberg) -- Lawmakers from Germany’s main political parties split over new bank capital rules, with Social Democrats in parliament wary of appearing too soft on the finance industry, according to two people with knowledge of the discussions.

Chancellor Angela Merkel’s Christian Democrat-led bloc and their coalition partners, the Social Democrats, had planned to pass a resolution urging the Basel Committee on Banking Supervision and the European Union to ensure that changes to the rules for measuring asset risk don’t result in higher capital requirements, the people said, declining to be identified because the talks are private.

The SPD’s faction in the Bundestag, the lower house of parliament, blocked the joint resolution, and without their support the Christian Democrats abandoned the effort and will issue a declaration of their own, the people said.

The failed plan illustrates the political complexities surrounding banking regulation in Germany and Europe. Wolfgang Schaeuble, Germany’s CDU finance minister, last week was the latest European policy maker to insist that the Basel Committee ensure its revised rules have no “particularly negative consequences for specific regions.”

Capital Framework

The SPD, however, has no interest in loosening the requirements on banks, according to Lothar Binding, the party’s lead lawmaker on financial policy.

“We stand by our regulatory goals: we want to continue to reduce risks,” Binding said. “We don’t want to soften regulation.” He declined to comment on the proposed resolution.

The Basel Committee is meeting for a second day on Thursday as it races to finish work on the post-crisis capital framework known as Basel III by the end of the year. Banks warn that proposed changes in how they assess credit, market and operational risks would send capital requirements spiraling.

The regulator has said the goal of the exercise is to make the risk-weighting assessments more consistent, and that it wouldn’t lead to significant increases in capital requirements overall. In the declaration obtained by Bloomberg, CDU lawmakers will demand that this pledge apply not only in aggregate, but also for individual banks.

Savings Banks

The lawmakers will also demand protection for politically sensitive lending for residential and commercial real estate, as well as to to small and medium-sized companies. The declaration puts particular emphasis on the impact on savings and cooperative banks, whose owners include voters and municipalities.

“No regional market should be affected disproportionately and conservative business models typical in Europe mustn’t be disadvantaged,” the declaration states.

Conservatives’ support for the banking sector in Germany hasn’t dimmed even after commercial real estate lenders such as Hypo Real Estate Holding, as well as the Landesbanks -- wholesale lenders co-owned by savings banks -- contributed significantly to the 2008 financial crisis.

To contact the reporters on this story: Birgit Jennen in Berlin at bjennen1@bloomberg.net, Boris Groendahl in Vienna at bgroendahl@bloomberg.net. To contact the editors responsible for this story: Patrick Henry at phenry8@bloomberg.net, Alan Crawford at acrawford6@bloomberg.net, Tony Czuczka