German watchdog touts impact study on global banks
German financial watchdog Bafin wants an international impact study in the coming months to develop ways of identifying banks that could threaten the global financial system.
January 14, 2011 / 19:28 IST
German financial watchdog Bafin wants an international impact study in the coming months to develop ways of identifying banks that could threaten the global financial system.
"Up to now there is no convincing method of clearly identifying (globally systemically important banks)," Bafin President Jochen Sanio said on Thursday in remarks at the watchdog's New Year's reception.International regulators are working to develop a list of the most significant financial players who could threaten to drag down the system if they ran into trouble, but Sanio warned against over-shooting in the current regulatory fervour.Banks in general are already going to be required to hold bigger capital cushions against risks under new banking rules, dubbed Basel III. Globally relevant banks face additional charges.Sanio said he expected regulators to have developed a list of around 25 such large banking groups by the middle of the year."We hope that this will be based at least on reliable data from an impact study by the spring," he said.Sanio also warned that piling too many demands on banks would do more harm than good if the new rules wound up pushing banks' toward bolstering earnings by taking on higher risks.The Basel III rules could create a two-tier banking system, forcing some lenders to play in a lower league, while the biggest banks became even larger and potentially more of a risk to the global system."In contrast to some of my foreign colleagues, I don't believe that systemic risk will vanish because of capital charges," he said.Regulators also needed tough rules to control "shadow" banking activities that might fall outside of the normal regulatory purview, he said."If we don't do that then shadow banking will become the growth sector of the financial industry," Sanio said. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
