Banks are breathing a sigh of relief and watching their share prices rise across the board today following easier-than-expected terms from the new Basel 3 bank rules passed this weekend.
Although the sector will have to raise hundreds of billions of euros to establish seven percent capital reserves instead of the current two percent, they have been given eight years to do it.
“What we have decided is commensurate to permit when we have all the standards in place to make the banking sector at a global level much more
resilient,” said ECB President Jean-Claude Trichet.
Weaker banks may be forced into a rush to raise cash, but many have already anticipated the new rules and may not need to go cap in hand to the markets. Certainly many bank bosses are not expressing concern.
“I believe that so much time has been given for the implementation of the new rules that the consequences on the real economy are reduced, which is very positive,” said Deutsche Bank chairman Josef Ackermann.
Regulators decided it was better to let the banks recover and contribute to the economic recovery first. Critics say intensive lobbying by the banks of the Basel 3 central bankers and supervisors from 27 countries has let the moneymen off the hook.