New financial rules to cost banks €50 billion

Tough new financial regulations will impose a greater burden on German banks than thought, forcing them to put aside an extra €50 billion in capital in coming years, a central banker has said.

New financial rules to cost banks €50 billion
Photo: DPA

Under the so-called “Basel III” financial system regulations, banks will have to raise the capital to protect themselves against unforeseen future crises, Bundesbank board member Andreas Dombret told Manager Magazin in an interview published Thursday.

It is the first time there is a concrete total as to how much the tougher regulations will cost. Under Basel III, banks have to come up with larger capital buffers to protect themselves against financial emergencies. In particular, there will be tougher rules about what actually constitutes capital resources.

Leaders signed off on the new regulations at the G20 summit in Seoul last week.

The new multi-billion euro calculation arises from simulations of what would happen in a crisis, which are to be published in the Bundesbank’s financial stability report on November 25.

One part of the additional capital could probably be raised through profits, Dombret said.

“But external capital measures will be called for,” he added.

Dombret also warned against premature assumptions the financial crisis was over.

“We are in the fourth year of the crisis. There is no reason to sound the all-clear.”

The difficult budget situation of many industrial nations represented a serious challenge for the stability of the financial system. Furthermore, the interbank market was still not working fully, he said. Many banks were still dependant on the central bank for liquidity.

Lower interest rates in the euro zone at the same time carried new risks for financial stability, he said.

“We have to watch very closely where new bubbles develop and what the risks are,” he said.

The Local/dw

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German watchdog steps up monitoring of popular N26 online bank

Germany's financial watchdog on Wednesday ordered online bank N26 to step up "internal controls and safeguards" to prevent money laundering and terrorist financing, and said it was appointing a special representative to monitor progress.

German watchdog steps up monitoring of popular N26 online bank
An N26 card. Photo: Wikimedia Commons

Bafin’s announcement marks an escalation of previous warnings to the popular Berlin start-up, which has come under fire in the past for not properly verifying the identities of new customers.

“Bafin ordered N26 Bank GmbH to rectify deficiencies both in IT monitoring and in customer due diligence,” the regulator said in a statement.

N26 “is required to ensure that it has the adequate personnel, technical and organisational resources to comply with its obligations under anti-money laundering law,” it said.

A “special commissioner” would oversee the company’s efforts, Bafin added. Founded in 2013 and known for its transparent debit cards, digital bank N26 is one of Germany’s most high-profile financial technology or “fintech” firms and now has seven million customers in 25 countries.

Its rapid growth has rested in part on fast-track identity procedures for new customers.

READ ALSO: What is the digital German bank N26 that’s about to hit a million users?

In 2019, German business weekly WirtschaftsWoche said it had managed to open accounts using forged IDs.

N26 on Wednesday pledged to “work closely” with Bafin and the special representative.

It said it had already significantly increased measures to prevent money laundering in recent years, “but we recognise that more must be done in this area”.

The coronavirus crisis had contributed to a spike in fraudulent online transactions worldwide, N26 added, “increasing the demands placed on banks in the fight against crime”.