BRUSSELS (MNI) – The impact of Basel III rules on the real economy
is subject to “considerable uncertainty” but should not undermine the
economic recovery, European Central Bank Governing Council member Axel
Weber said on Wednesday.

“I am not afraid that the implementation of Basel III might
significantly impair the lending capacity of banks or hamper economic
recovery,” Weber said in the text of remarks for delivery at the Eurofi
conference here.

“While being subject to considerable uncertainty, recent
comprehensive impact studies by the Basel Committee and the Financial
Stability Board suggest the economic impact during the transition period
will be moderate and that the long-term net benefits will be positive,”
Weber noted.

In introductory remarks to a panel discussion, Weber said that
global implementation of new Basel rules are of “utmost importance in
order to guarantee a level playing field and to prevent regulatory
arbitrage.”

But “some elements of the package require further work in the
process of finalizing the whole,” the head of the Bundesbank said.

“In particular, the extent of anti-cyclicality of capital buffers
might be strengthened further, and the requirements of the liquidity
buffer in its currently proposed form warrant further adjustment as
well: requirements for eligible assets of private issuers, for example,
appear rather strict,” Weber said.

Further progress is also urgently needed on the macro-prudential
level, Weber warned. “Our major concern in this respect is the
too-big-to-fail issue. Efforts are being made by the [Financial
Stability Board] to present an approvable base solution to the G20
summit.”

Weber said that the establishment of the European Systemic Risk
Board was an important step in the right direction of developing
macroprudential surveillance that goes beyond individual national
institutions. “Now the challenge for its members is to make it a
success,” he said,

Even if this challenge is met and reform efforts continue, they
will not avert another crisis, Weber cautioned.

“Financial reform will not save us from any future financial crisis
but it can significantly dampen the frequency and intensity of financial
crises in the future,” he said.

–Frankfurt bureau tel.: +49-69-720142. Email: jtreeck@marketnews.com

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