The US has been warned against unilateral action by Germany’s watchdogs, as the former’s regulators consider stricter capital rules for foreign banks.
According to German markets regulator Bafin’s president, Elke Koenig, that move will be "a step in the wrong direction", reported Reuters.
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Bafin said it was in "intense and constructive talks" with its US counterparts about their plans to tighten oversight of foreign banks, including requiring them to hold bigger capital and liquidity buffers against the risk of a financial market downturn.
As a means to improve capital cushions and a way to absorb potential losses in a crisis, international regulators have come to an agreement to introduce more stringent bank safety rules by the end of 2018.
Bafin calculated that big banks in Europe’s largest economy still needed an extra EUR14 billion in capital to fulfil stricter bank safety rules, even though German banks had made progress in raising their own capital buffers.
Due to capital increases and the selling down of risky assets, German lenders have reduced their capital shortfall from EUR32 billion and now have regulatory core capital of between 10% and 18%, according to Bafin.
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By GlobalDataBundesbank Vice President, Sabine Lautenschlaeger, added that unilateral action by US regulators would "make managing big banks more difficult and also make it harder to wind down globally active banks that run into trouble".
