German bank lobby warns new rules will choke profits and hurt growth

NEW banking rules and levies aimed at preventing future financial crises will choke profits and may threaten economic growth, the trade lobby for Germany’s big banks said yesterday.

The Basel III changes to banking capital rules adopted this month went in the right direction but, taken in context with a raft of other proposed taxes and reforms, vastly increased the burden on lenders in Europe’s biggest economy, said the BDB banking association, which represents top lenders like Deutsche Bank and Commerzbank.

“Out of every €10 (£13) in profit there will be only €3 left once taxes and levies are deducted,” association head Manfred Weber said.

That projection did not even take into account the possible impact of the new Basel III capital requirements, he said.

The Bundesbank said that although the new Basel rules and a planned levy in Germany would crimp revenues at German banks in the short term, compared with before the financial crisis, lenders would also benefit from the increased financial stability that it said would result.

Banks would be able to meet the new capital rules without hurting growth, the central bank predicted.

“The Bundesbank’s assessment is that German financial institutions will be able to raise the additional necessary capital to meet the capital requirements via accumulated earnings and raising capital if needed, without there being a reduction in debt to the real economy's detriment,” it said.

Germany’s recovery had weakened in the last few months but was still intact, the central bank added.