Raise capital requirements once the crisis is over

13 July 2009 - “The European Commission’s latest changes to the Capital Requirements Directive are to be supported in principle, but the exact timing of the new rules needs to be considered very carefully,” said Hans-Joachim Massenberg, Deputy General Manager of the Association of German Banks. On no account should the envisaged increases in capital requirements put further pressure on the banks’ balance sheets before the financial and economic crisis has been overcome.

Under the Commission’s proposal, banks will have to put significantly more capital aside to cover positions in the trading book and complex securitisations. The new rules are to take effect from 31 December 2010. “Defaults caused by the economic downturn will have their biggest impact on the banks’ balance sheets from next year on – this is why we consider the planned entry into force premature,” continued Massenberg.

He stressed that the Association of German Banks took a positive view of the revised Capital Requirements Directive and believed it would help to make the banks more resilient. It was important, however, that the basically legitimate changes to capital requirements should not overshoot their target. “Owing to recent rating downgrades, especially of complex securitisation instruments, the banks are already holding more capital for products such as these – this needs to be borne in mind.”

Association of German Banks
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