04 July 2002

HB: Germany Agrees to Compromise on Basle II Agreement

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A signficant breakthrough was achieved on Wednesday in efforts to reach a new international agreement on supervising bank solvency, the German Handelsblatt reports. The German government withdrew its objections to the plans, saying a compromise solution, due to be discussed by financial regulators in Basel, Switzerland, on July 10, was now taking account of all its previous concerns.

German Chancellor Gerhard Schröder told a news conference in Berlin that his government’s prime objective - to prevent the so-called 'Basel II' accord leading to more expensive loans for Germany’s small and medium-sized, or Mittelstand, firms -had been met. 'My impression is that...a result can be achieved that is in the interests of the German Mittelstand,' Schröder said. 'There will not be any general increase in the cost of financing for Germany's Mittelstand...I think it's a good result for us all,' he added.

German industry had been unanimous in expressing concern that Basel II - which aims to make banks adjust the regulatory capital they set aside on their loans in line with the risks they are taking - would be the final nail in the coffin for bank finance. Next week's discussions are likely to lead to a package deal on the most politicial issues standing in the way of the agreement, allowing more technical issues to be tackled before a final consultation paper is issued next May.

If all goes to plan, regulators will sign off on the agreement in autumn 2003, said Edgar Meister, the Bundesbank board member in charge of banking supervision issues.

HB: Germany Agrees to Compromise on Basle II Agreement

Further readings from German Handelsblatt:
Basel: Durchbruch für den Mittelstand
Schröder: Basel II wird Forderungen des Mittelstandes gerecht

© Handelsblatt