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 periods.
"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 Messaging: Arno.Schuetze.firstname.lastname@example.org)) ($1=.7816 Euro)