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At the end of November, the Basel Committee on Banking Supervision is due to try and broker compromises on new rules to make banks safer, including on the hotly-disputed question of how much leeway banks should be given in measuring the riskiness of their activities by using so-called internal models.
US regulators want to limit banks’ room for manoeuvre in order to prevent them from trying to game the system, but their European peers argue that transatlantic differences in banking markets, such as how mortgages are treated, mean greater discretion is needed.
At a press conference in Frankfurt, Michael Kemmer, head of Germany’s BdB banking association, which represents the likes of Deutsche Bank and Commerzbank, said that, “as a last resort”, Europe should simply not enact any new rules if they disproportionately hurt European lenders.
“I personally think a unified international set of rules — the famous level playing field — is very, very important,” he said. “We have been fighting for this for decades. An international set of rules is of great value. We shouldn’t give it up — but we don’t rule out [doing so].”
Liane Buchholz, head of the Association of German Public Banks (VÖB), which represents Germany’s Landesbanken, said the Basel Committee’s proposals to restrict banks’ freedoms to use internal risk models “were characterised by a critical view of the normal risk-sensitive way of determining capital requirements in Europe”.
“Getting rid of, or substantially limiting, this approach, which is approved by banking supervisors, would be a huge disadvantage for the European financial system and would also hit the economy in Europe,” she said. [...]
Lothar Jerzembek, from the VÖB, said that if the new rules being considered by the Basel Committee were implemented as currently envisaged, they could increase the capital requirements for German banks by 30 per cent on average.
Mr Kemmer said that one result of restrictions on banks’ freedom to use their own risk models would be a “drastic” increase in capital requirements for property financing — at a time when the country needs to build more properties to accommodate the huge numbers of refugees who have arrived over the past year.
Full article on Financial Times