Bloomberg News

Maystadt Says Higher Bank-Capital Requirement May Stifle Lending

October 14, 2011

(See {EXT4 <GO>} for more on Europe’s debt crisis.)

Oct. 14 (Bloomberg) -- European Investment Bank Chairman Philippe Maystadt said raising capital requirements for banks in the region might choke off lending and impede economic recovery.

European Commission President Jose Barroso called on Oct. 12 for a coordinated recapitalization of the region’s lenders, with government funds if necessary, as part of a wider rescue package. Banks would temporarily have to meet “significantly higher” capital requirements and those incapable of providing the extra buffers should be prohibited from paying bonuses or dividends, Barroso said.

“A very likely consequence of the measures that are being announced right now is that banks will further restrict credit to the real economy, and in particular for investment, which is a determining factor for recovery,” Maystadt said at a forum in Brussels today.

Maystadt said he’s “not convinced” that most big European banks are short of capital, though they’ll probably face a squeeze next year.

“Banks will likely have a funding problem in 2012, that’s clear,” he said. “They’ll have more trouble finding the funding they need and that means they’ll pay more for it, and therefore their profit will be reduced. But I’m not convinced at this stage that most big banks have a real solvency problem.”

Deutsche Bank AG Chief Executive Officer Josef Ackermann said yesterday that he doubted forcing European lenders to boost their capital levels would master the sovereign debt crisis.

“The European Banking Authority considers that we must now go to 9 percent to restore confidence,” Maystadt said. “As they say, one must now be ‘overwhelming’ -- do too much to show that we’ve done enough.”

“The reaction of banks is hardly surprising,” he said. “I fear that we’re seeing a sort of short-term escalation that doesn’t seem fully justified.”

--Editors: Eddie Buckle, Jennifer M. Freedman

To contact the reporter on this story: Patrick Henry in Brussels at phenry8@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


Toyota's Hydrogen Man
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus