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September 12, 2010    

Global regulators meet to agree stricter bank rules

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by Kay Murchie

As the second anniversary of the Lehman Brother collapse nears, regulators and central bank governors have met in Basel, Switzerland this weekend to discuss tougher capital rules.

The agreement could force banks to raise fresh equity in order to withstand future downturns in the global financial system.

Following the global financial crisis, the G20 leading nations urged regulators and central bankers to introduce stricter bank capital rules.

The G20 leaders are set to approve this weekend’s agreement when they meet in Seoul later this year, with the new rules being introduced from 2013 in phases.

The deal is also expected to see new rules on bank ratios - the higher a ratio, the more risky a bank may be to higher defaults.

According to analysts, a minimum “tier one” requirement of between 4-6% is expected, however, this is lower than the 8-9% ratio currently held by UK banks.

The new regulations will mean some banks will need to raise further funds from shareholders.

The news comes just days after Germany’s largest lender, Deutsche Bank, was reported to be embarking on a €9 billion (£7.4 billion) rights issue to strengthen its balance sheet.

According to analysts, the cash call is set to be the first in a series of fundraisings by banks throughout the world.

The National Bank of Greece launched a rights issue last week, and more lenders in Greece, Spain, Portugal and Italy are expected to follow suit.

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