German banks could require an extra £88bn under Basel rules

GERMANY’S 10 biggest banks may need €105bn (£87.8bn) of additional capital under a revamp of banking rules designed to prevent future financial crises, the country’s banking association said.

International banking regulators known as the Basel Committee will likely require banks to have a Tier 1 capital ratio of six per cent, up from four per cent, said Germany’s 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 to avoid another downturn such as the recent financial crisis.

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

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.