FRANKFURT (MNI) – Tighter capital rules for banks should not weigh
significantly on the real economy and their determined and consistent
implementation is crucial, European Central Bank Executive Board member
Jose Manuel Gonzalez-Paramo said Friday.
“The [banking] industry is of the view that Basel III will increase
costs for banks, reduce profitability, lead to credit supply
restrictions and, ultimately, hurt the economy,” Gonzalez-Paramo
observed.
However, he stressed that this view is “based on misconceptions
that are important to dispel.”
While there may be some short-term adverse effects, these are
“expected to be moderate, notably if they are spread over a long
implementation period,” he said.
Gonzalez-Paramo pointed to ECB estimates that concluded that a one
percentage point increase in the capital ratio implemented over eight
years would result in a moderate cumulated reduction of GDP of around
0.15 percentage point.
“In the long run, benefits brought by the enhanced capital and
liquidity regulation can be substantial,” Gonzalez-Paramo argued.
“They include a reduction in the frequency of crises and hence on
the expected output losses associated with systemic events. The new
framework should also improve the level playing field for the
international banking sector. This is expected to help financial
institutions to save costs and to encourage crossborder activities,” he
said.
To ensure that the new regulatory regime will be effective, “a
coherent and consistent implementation of the reforms at a global level
is of paramount importance,” Gonzalez-Paramo said. “Only then can
regulatory arbitrage be prevented and a level playing field ensured.”
“Determination and consistency in the implementation of these
reforms is therefore now crucial,” Gonzalez-Paramo asserted.
–Frankfurt bureau; +49-69-720142; jtreeck@marketnews.com
[TOPICS: M$$EC$,M$X$$$,MT$$$$,MGX$$$,M$$CR$]
