Ossig: Basel III mustn’t handicap European banks
- Basel III: no compromise for the sake of compromise
- Proportionality: provide appreciable relief to small and medium-sized banks
- Review regulation as a whole
The ongoing Basel talks mustn’t lead to European banks ultimately being handicapped. This is the message from the Association of German Banks. “But we are afraid that this is exactly where Basel III is heading at the moment. The output floor of over 70% now proposed will lead to a significant increase in capital requirements for European banks alone, but in no way strengthens financial stability,” said Christian Ossig, a member of the association’s senior management board, with today’s conference in Frankfurt on “New developments in banking supervision” in mind.
Good regulation should be geared to banks’ risk exposure. “However, there is the danger of this principle being undermined in the present Basel talks,” Mr Ossig added. That things could be done differently and better was currently shown by the proposals on proportionality presented jointly by German supervisors and the banking industry. Mr Ossig: “We Germans have made a significant step forward here towards providing appreciable relief from the glut of regulation to small and medium-sized banks. We’ll now be pressing ahead with our proposals at European level.” But this didn’t mean setting different requirements for the level and quality of capital or different liquidity rules.
There was, however, still a long way to go in appraising existing regulation and dropping it where ineffective. The approach pursued to date by the EU in this respect didn’t go far enough. Yet it was important to carry out an unbiased review of regulation as a whole. Mr Ossig: “What is also clear is that we by no means want to reverse the progress made in regulation but instead to eliminate inconsistencies and cut out undesirable side effects. The US is already a step further here.”