March 5, 2010 / 5:16 PM / 9 years ago

German banks take aim at Basel III leverage cap

LONDON, March 5 (Reuters) - A planned cap on bank leverage would not make the sector safer, said a German banking lobby on Friday, adding heavyweight support to a growing campaign.

Dirk Jaeger, managing director for banking supervision at the Association of German Banks (BDB), said a leverage ratio did not take into account the riskiness of financial transactions.

It would create problems for German universal banks even though they had a much lower risk exposure than “Anglo-Saxon” investment banks, Jaeger said in a statement.

“The introduction of a leverage ratio won’t help to stabilise the financial system — on the contrary,” Jaeger said.

The G20 group of leading countries agreed last September to introduce a leverage ratio on banks by the end of 2012, as part of the Basel III reform from the global Basel Committee on Banking Supervision, to make the sector less risky.

The BDB warning comes ahead of the Basel Committee’s two-day meeting on Monday and Tuesday to review progress on the draft reform which is due to be finalised by year end.

Hans Hoogervorst, chairman of the Dutch markets regulator AFM said last week huge resistance is creating a risk the leverage ratio will be set too low and would be non-binding.

France does not want a fixed numerical cap, preferring to give national regulators discretion in supervising leverage.

Deutsche Bank (DBKGn.DE), a member of the BDB, says a ratio is simplistic, while Sweden wants a carve-out for its banks.

The United States already has leverage ratios and is keen for other countries to follow suit.

The BDB said a study from the WHU Otto Beisheim School of Management concluded a ratio would likely force banks to scale back on lending and threaten recovery. (Reporting by Huw Jones; Editing by David Holmes)

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