German banks 'will need €105bn for new Basel capital rules'

Germany's ten biggest banks may need €105 billion (£88bn) of additional capital under a revamp of banking rules designed to prevent future financial crises, the country's banking association said yesterday.

International banking regulators known as the Basel Committee will likely require banks to have a Tier 1 capital ratio of 6 per cent, up from 4 per cent, said the BdB banking association, whose members include lenders such as Commerzbank and Deutsche Bank.

Regulators are bumping up the amount of capital banks need to hold in an effort to ensure lenders have an array of loss-absorbing backstops that can be used in case of a downturn.

Buffers for capital conservation of an additional 2 per cent and a countercyclical capital buffer of 2 per cent more are also likely to be applied, the BdB said.

The Tier 1 ratio and each of the buffers probably would be composed of 80 per cent of top quality or "core Tier 1" capital, which consists of equity capital and retained earnings, BdB said. Many leading banks already hold Tier 1 capital of 10 per cent or more.

But many lenders also needed time to adjust, particularly as politicians were also weighing separate measures, BdB's Hans-Joachim Massenberg said.