French Banking Body: Forcing Bks To Hold More Cap No Panacea
PARIS -(Dow Jones)- Forcing banks to hold more capital regardless of the risks they take is not the best way of ensuring global financial stability, the chief executive of the French Banking Federation said, as it could weigh on their ability to fund the economy.
"One should not think that the problem of global financial stability can be solved only by forcing banks to add on more layers of capital (...) Banks shouldn't be burdened too much or they will struggle to fund the economy," Ariane Obolensky told reporters Wednesday in a press conference outlining the expectations of French banks on the outcome of the summit of the Group of 20 largest industrialized and emerging economies.
The G20 summit is to be held in Pittsburgh at the endof the month.
Her comments come as central bankers and financial supervisors from the Bank of International Settlements Sunday agreed on a set of measures to strengthen the supervision and the capital requirements of banks, in order to prevent future crises.
These will include raising the quality of the Tier 1 capital base and introducing a leverage ratio alongside the Basel II risk-based framework, used mainly by European banks.
"The capital of banks needs to be reinforced only if the risks they take warrant it..
