Forcing banks to keep more capital on hand will restrict the amount of loans they can make and as the banks provide 97% of the world economy's money supply rules that are intended to boost confidence that the banking system won't repeat past mistakes, will also restrict economic development. This is the contradiction of allowing private profit making institutions to provide our money supply.
Over the weekend, the head of the European Banking Federation (EBF) warned that Basel III could put jobs at risk. "EBF members are very concerned about the effect that [new regulations] may have on banks' lending," said Alessandro Profumo, chief executive of Italy's UniCredit bank, in a letter to European Central Bank President Trichet. http://www.guardian.co.uk/business/2010/sep/12/banking-basel-capital-requirements-raised
The federation, which represents more than 5,000 banks, said its analysis of proposed new Basel III banking standards shows that it would limit banks' credit growth and profits, hurt the economy and prevent the creation of up to 5 million jobs in the eurozone.
Under current rules, banks must hold back at least 4 percent of their balance sheet to cover their risks. This mandatory reserve – known as tier 1 capital – would rise to 4.5 percent by 2013 under the new rules and reach 6 percent in 2019. In addition, banks would be required to keep an emergency reserve known as a "conservation buffer" of 2.5 percent. In total, the amount of reserves each bank is expected to have by the end of the decade will be 8.5 percent of its balance sheet.
However many of our economic woes stem from off balance sheet trading in collatorised debt obligations and derivatives, so simply requiring the banks to hold more capital and cash will not deal with these risks.
Already one bank has cited the new rules as a reason to tap the market for billions of euros in new capital. Germany's biggest bank, Deutsche Bank AG, announced plans to raise at least 9.8 billion euro ($12.4 billion) in a capital increase. The have planned issue of 308.6 million new common shares, most of which will be purchased by investors such as our pension funds.
So there we have it then the penalty banks will have to pay for economic destruction is a requirement to hold more capital and reserves. The cycle comes full circle when they come back to our pension funds for more money to buy their shares, then the giant global machine of debt will start up once again to prepare for the next economic crisis and continue humanities debt enslavement.
