UPDATE 2-France says to balance Basel rules with growth

Published 10/15/2010, 11:55 AM

* No need to follow other nations with stricter rules -Noyer

* Premature to say how France will apply Basel -Lagarde

* One rule for all banks makes no sense -SocGen's Oudea

* Basel watchdog to mull liquidity idea next week -sources

(Adds European regulatory sources)

By Lionel Laurent and Daniel Flynn

PARIS, Oct 15 (Reuters) - France will not blindly follow other countries in imposing tougher capital requirements on its banks as it seeks to balance the needs of its recovering economy, senior policymakers said on Friday.

Bank of France Governor Christian Noyer told a news conference with Economy Minister Christine Lagarde and Societe Generale Chief Executive Frederic Oudea that countries need not all apply tougher capital rules in the same way.

The Swiss regulator has already confirmed it will ask its banks to carry more Tier 1 capital than the minimum 7 percent recommended by the Basel Committee on Banking Supervision, which sets global bank rules. Great Britain is seen as another country likely to follow suit.

"If certain countries believe they should demand much more (than minimum requirements) because their banking systems and regulatory framework require it, it should not follow on from that that everyone needs to do the same thing," Noyer said.

Lagarde added it was "premature" to discuss exactly how France would apply the so-called Basel III rules, which were only disclosed last month and which have yet to be adopted by the G20 leaders who will meet in Korea next month.

As with the current Basel II framework, it will be up to national regulators to decide how they will integrate the rules.

"The Basel Committee's proposals are going in the right direction. That said, taking into account the French economic landscape and the financing needs of our economy, we will be extremely attentive that the French economy will be adequately financed," Lagarde said.

The Basel Committee is still working to hone rules that are expected to force banks to hold substantially more liquid assets as a buffer to help them get through shocks.

Two European regulatory sources said on Friday that the committee is due to discuss on Tuesday a paper drawn up by France, Germany and other countries that would take special account of liquidity needs at banks that operate within mutually supportive networks, such as cooperative banks and Germany's public landesbank-savings bank systems.

The networks' own central banks bundle liquidity from lenders within their alliance, which tends not to be withdrawn in a financial crisis, as can happen at other types of banks.

SOLVENCY RACE

The new Basel framework is due to come into force in 2019, but investor fears over capital have pushed banks to declare they will be compliant well before the deadline.

This "solvency race" has reignited speculation that there will be rights issues across Europe's banking sector. Britain's Standard Chartered has tapped the markets already.

SocGen's Oudea, who has repeatedly ruled out the need for a rights issue to meet Basel requirements, said it made no sense to apply the rules in a uniform manner across the world.

"Why the devil apply the same rule on different banks? ... A single and same rule does not make sense," he told the conference.

French banks including SocGen are trading at a discount to European peers because of fears they may need more capital and their relative lack of disclosure on the impact of new Basel rules on risk-weighted assets.

(Additional reporting by Jonathan Gould, Philipp Halstrick and Alexander Huebner in Frankfurt) (Editing by Catherine Evans)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2025 - Fusion Media Limited. All Rights Reserved.