Banks Want Merkel to Use EU Presidency to Ease Capital Rules

(Bloomberg) --

Germany’s banks are hoping Chancellor Angela Merkel’s government will soften the looming blow from tougher capital rules when it takes on the rotating presidency of the European Union in the second half of this year.

Deciding how to implement new standards for the financial strength of banks “may be the decisive issue” of Germany’s six-month tenure, said Christian Ossig, a co-chief executive at the Association of German Banks. “Our impression is that Berlin and the federal government are asking the right questions,” he said.

European bankers have been battling the new standards from the Basel Committee on Banking Supervision, a group of international regulators charged with averting a repeat of the turmoil from the 2008 financial crisis.

While regulators want banks to be better able to absorb losses without asking taxpayers for a bailout, lenders argue that tighter rules risk choking off the flow of credit to the wider economy.

The German government has previously shown a willingness to revise financial regulation, in part because of the weakened state of its banking industry. The country’s EU presidency may be the best shot left to water down the Basel regulation before it becomes binding in coming years.

Biggest Lever

Avoiding duplication with existing requirements “is the biggest lever to absorb the shock in Germany,” Ossig told reporters in Frankfurt on Monday. “But we also have to look at what aspects make it harder to fund medium-sized companies, real estate and trade.”

Deutsche Bank AG recently estimated the new Basel rules will push up assets weighted for risk by 10%-15% by 2028. Several analysts have said a strong Basel impact could force the bank to seek fresh funds from shareholders, though Chief Financial Officer James von Moltke has said he’s confident that won’t be necessary.

Germany’s EU presidency may also provide a catalyst for the revision of MiFID II, a wide-ranging package of regulations that the country’s lenders have blamed for eroding their revenue, said Andreas Krautscheid, the bank lobby’s other chief executive.

The association is “very happy” that the German Finance Ministry’s position on revising the rules reflects feedback from the industry, he said.

To contact the reporters on this story: Nicholas Comfort in Frankfurt at ncomfort1@bloomberg.net;Steven Arons in Frankfurt at sarons@bloomberg.net

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Iain Rogers, Andrew Blackman

©2020 Bloomberg L.P.