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Market reation to banking rule "Basel III"

09-14-2010 13:46 BJT

Global regulators agreed over the weekend to force banks to more than triple the amount of top-quality capital they must hold in reserve. Bankers and analysts said new global rules could mean less money available to lend to businesses and consumers, but praised a decision to leave plenty of time - until 2019 - before the financial stability requirements come into full force.

There's little doubt banks are bouncing back.

And they've breathed a sigh of relief, after new bank capital rules were agreed at the weekend.

The requirements, known as Basel III, demand banks build up and hold large amounds of capital as a cushion in case risky investments go bad, a scenario which triggered the global financial crisis.

That capital must total seven percent of a bank's risk-bearing assets, up from the current two percent.

The figure's still much lower than many banks feared, and doesn't have to be completely in place until 2019.

David Buik, from BGC Partners.

David Buik, BGC Partners said "In a way I think we're quite surprised that it's not as draconian as we thought it might be and this looks like a pretty soft effort by the Basel III commission."

Europe is the most likely region where banks will need to raise funds, notably Germany and Spain.

Traders in Frankfurt believe the new rules will also tighten up rivallry.

Robert Halver, Trader with Baader Bank said "The new regulations of Basel III will mean that in the long term, there will be a stricter competition between banks, especially in Germany between the private banks and the savings and loan companies in Germany."

Not everyone is convinced the cash buffer is the answer.

Analyst Roger Nightingale says excessive risk taking not insufficient capital caused the last crisis.

Roger Nightingale, Global Strategist of Pointon York said "They were doing things they shouldn't have done, their chief executives weren't being sensible and it really didn't matter terribly much how much capital they had. They would still have failed. So I'm inclined to believe that Basel III is pretty unimportant."

Still, investors appear to appreciate the way the new rules were delivered, with banking stocks up on Monday.

Editor:Xiong Qu |Source: CNTV.CN

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