Bank association warns capital regulations could throttle lending

German banks may be forced to reduce their lending activity in order to drastically increase their capital base under proposed new regulation, Germany's private banking federation warned on Monday.

• Snow to follow record deep freeze (6 Feb 12)
• Former spy boss moves to Deutsche Bank (6 Feb 12)
• Bestiality brothels spur call for animal sex ban (3 Feb 12)

The possible introduction of a strict ratio linking banks' capital to their lending activities would be "counter-productive" since banks would be forced to reduce their loans, Germany's BdB federation said in a statement.

"Going too far would threaten the economic recovery and positive developments on the labour market," the statement said.

The Switzerland-based Basel Committee - the main international forum for banking regulation - is expected to meet on Tuesday to discuss tighter rules aimed at trying to avert another global financial crisis.

The new rules are set to go for final approval before a meeting of the Group of 20 developed and emerging economies in Seoul in November.

The BdB federation said that implementing all the new regulations would force Germany's top 10 banks to raise €105 billion ($135 billion).

The German government has expressed some reservations but has not directly opposed the new rules and has said it hopes for a long transition period.

AFP/mry