Top bankers pleaded on Tuesday for a prudent approach to rule-making as policy makers across the globe seek ways to reshape the global financial system in a bid to prevent another Lehman Brothers-style crisis. Deutsche Bank chief executive Joseph Ackermann told a banking conference that regulators could choke off an economic rebound if they made overly restrictive rules on how much capital and liquidity banks need to hold.
"It is important that, before we take a detailed look (at capital requirements), we do a cost-benefit analysis for the economy. The consequences for credit availability and the price of credit need to be considered," he said. But he acknowledged that the banking industry did not have enough capital.
"And I deem it right that this has to be corrected." He said it would be proper to make banks hold core capital equal to 8 percent of their risk-weighted assets but that common equity, not complex hybrid instruments that mix characteristics of debt and equity, should form the bulk of this. Ackermann said he was spotting signs the economy was stabilising, noting sentiment in Germany had improved.
"We are seeing light at the end of the tunnel," he said. The annual Banks in Transition conference in Germany's financial capital drew hundreds who paid 2,149 euros ($3,100) each for the two-day event featuring top officials from such big names as Goldman Sachs, Morgan Stanley, HSBC and Deutsche Bank.
The event comes on the eve of the anniversary of US investment bank Lehman Brothers' collapse, a watershed in the financial crisis as investors realised with horror, and at times panic, that some banks were not too big to fail. Banks are feeling the heat now as regulators, central banks and national governments take measures to ensure freewheeling banks do not become loose cannons in the economy again. Central bankers on Sunday proposed a new regulatory framework that would force banks to set aside more profits as a cushion against hard times.
Some finance ministers from the Group of 20 countries also want to explore ways to rein in banker bonuses. Although regulators and politicians broadly agree that excessive risk-taking by highly paid bankers was one of the main causes of the financial crisis, they have struggled to agree on how to regulate or cap bonuses.
Bernd Knobloch, a former executive board member at Germany's Commerzbank, said it made sense to raise capital requirements and set strict liquidity rules for big banks whose collapse could trigger a chain reaction across entire economies. But he opposed regulating what bankers earn, insisting instead that banks themselves could best decide this. "We have to strengthen the banks and for this we need good management," he said.
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