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.