| FRANKFURT, Sept 13
FRANKFURT, Sept 13 The only complaining from
Germany -- the one country that objected to draft Basel III bank
capital rules in July -- came on Monday from landesbanks poised
to be deprived of support much more quickly than they had hoped.
Sources close to the matter said negotiators from the
Bundesbank and regulator BaFin were able to dilute some of the
new standards in the final round of talks, overcoming objections
of harder-line Anglo-Saxon counties.
This helped savings banks and cooperative banks that stayed
out of the line of fire in the financial crisis.
But it left out in the cold some of landesbanks, who act as
wholesale banks to the country's myriad local savings banks and
whose weaknesses were brutally exposed during the crisis.
Especially hard hit are the landesbanks with joint stock
corporate forms. They will not to be able to count a form of
non-voting capital known as "silent participations" as the
highest quality form of capital from 2013.
These funds at partly state-owned banks like NordLB
[NDLG.UL] or Helaba LHTGg.F will still count as capital under
some conditions, while those for joint stock companies like HSH
Nordbank [HSH.UL] and eventually LBBW [LBBW.UL] and BayernLB
[BAYLB.UL] will not.
Silent participations -- common in Germany but rare abroad --
were at the heart of Germany's objections to new rules.
Because silent participations do not absorb losses as long
as a bank is still in business, regulators excluded them from
core capital, which could force some banks into a difficult
round of raising other forms of capital.
"This means that banks have to start thinking about how to
substitute this capital earlier that expected," said Ullrich
Hartmann, a regulatory expert at PriceWaterhouseCoopers.
A quarter to a third of the capital reserves of German
landesbanks, savings banks, cooperative banks, and private banks
come in the form of silent participations, adding up to a little
less than 50 billion euros ($64 billion) together.
The new rules could speed consolidation of the troubled
landesbank sector, long seen as a fiefdom for state politicians
and local power brokers.
"In the landesbank sector Basel III will create immense
pressure so that massive changes are to be expected within the
next two to three years," said Andreas Schmitz, president of the
Association of German Banks.
Germany's public sector banking lobby criticised the Basel
III deal as a "regulatory shot in the dark".
"It seems the timetable here was more important than quality
(making this) a compromise package with risks and side effects,"
said Karl-Heinz Boos, managing director of the VOeB lobby group.
He acknowledged landesbanks had sought longer transition
"But with the help of their owners landesbanks will be able
to adapt to the new rules", he said, adding that one way out was
a swap of the silent participations for equity.
Individual landesbanks said it was too early to decipher the
implications of the new rules.
(Additional reporting by Angelika Gruber in Frankfurt)
(Arno.Schuetze@thomsonreuters.com; +49 69 7565 1197; Reuters