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2010-09-13 03:51:03
By GREG KELLER, Associated Press Writer Greg Keller, Associated Press Writer
23 mins ago
BASEL, Switzerland Bank stocks rose Monday on news that global regulators
have agreed on new banking rules aimed at averting another financial collapse.
The new rules, which will gradually require banks to hold greater capital
buffers to absorb potential losses, are likely to reshape the credit industry
by imposing stricter discipline on credit cards, mortgages and other loans.
Fears that banks will have to raise large amounts of capital, hitting their
profits and shareholder dividends, depressed some bank stocks including those
of Deutsche Bank AG, which were down 0.3 percent in morning trading.
Market-wide, however, the reaction was positive, sending stocks in French banks
BNP Paribas and Societe General up 1.3 percent and 2.7 percent respectively. In
Switzerland, UBS AG, which was particularly hard hit during the subprime
crisis, rose 0.8 percent. Rival Credit Suisse Group was up 1.7 percent.
Shares of Britain's biggest bank HSBC PLC rose 1.2 percent in morning trading
while Unicredit of Italy saw its stock jump 2.5 percent.
Deutsche Bank's Chief Executive, Josef Ackermann, said at a press conference in
Frankfurt on Monday that he thought the Basel III package was a good one.
"I think the decisions that were taken are the right decisions, they go in the
right direction, and I also believe the fact that they gave the banking
industry so much time for implementation clearly reduces the effects on the
real economy, which is also very positive," he said.
"So it's a well rounded good package that we fully support."
Under the new rules endorsed Sunday, banks will have to significantly increase
their capital reserves to strengthen their finances and rein in some of their
risk-taking a move that some banks had warned could dampen the recovery by
forcing them to reduce the lending that fuels economic growth.
Requiring banks to keep more capital on hand will restrict the amount of loans
they can make, but it will make them better able to withstand the blow if many
of those loans go sour. The rules also are intended to boost confidence that
the banking system won't repeat past mistakes.
Down the line consumers could see banks tighten their rules on loans and
possibly impose higher banking charges as financial institutions spend the next
few years building reserves to meet the new regulatory requirements.
Under current rules, banks must hold back at least 4 percent of their balance
sheet to cover their risks. This mandatory reserve known as Tier 1 capital
would rise to 4.5 percent by 2013 under the new rules and reach 6 percent in
2019.
In addition, banks would be required to keep an emergency reserve known as a
"conservation buffer" of 2.5 percent. In total, the amount of rock-solid
reserves each bank is expected to have by the end of the decade will be 8.5
percent of its balance sheet.
U.S. officials including Federal Reserve chairman Ben Bernanke issued a joint
statement Sunday calling the new standards a "significant step forward in
reducing the incidence and severity of future financial crises."
European Central Bank president Jean-Claude Trichet, chairman of the committee
of central bankers and bank supervisors that worked on the new rules, called
the agreement "a fundamental strengthening of global capital standards" that
will encourage both growth and stability.
Representatives of the Fed, the ECB and other major central banks agreed to the
deal Sunday at a meeting in Basel, Switzerland. It still has to be presented to
leaders of the Group of 20 forum of rich and developing countries at a meeting
in November and ratified by national governments before it comes into force.
The agreement, known as Basel III, is seen as a cornerstone of the global
financial reforms proposed by governments stung by the experience of having to
bail out some ailing banks to avoid wider economic collapse.
Fred Cannon, a banking analyst at Keefe, Bruyette & Woods, said the rules
probably will reduce bank profit margins and lending from the heights they
reached in 2007. But he added that before 2000 or so, many U.S. banks were
already operating with enough capital reserves to meet the new minimums.
____
Associated Press writers Andrew Vanacore in New York, Martin Crutsinger in
Washington, Frank Jordans in Geneva and David Rising in Berlin contributed to
this report.