UPDATE 3-Final Basel reform goes to oversight body

* Final Basel III package heads for Sunday endorsement

* Germany appears unhappy with final recommendations

* Banks to hold 9 percent Tier 1 including buffer – report

* Analysts, regulators expecting core 6 percent Tier 1

(Adds German source on meeting)

By Huw Jones

LONDON, Sept 7 (BestGrowthStock) – Central bank and regulatory
officials agreed tougher new global bank capital rules on
Tuesday but will keep investors on tenterhooks about the details
until Sunday when formal endorsement is expected.

The Basel Committee ended its meeting with recommendations
on how much extra capital banks will have to hold in future to
avoid governments having to bail out the sector in the next
crisis, a source familiar with the process said.

It also agreed arrangements for phasing in higher standards
on the quality of capital banks must hold in future.

“The Basel Committee has said they are on track with their
discussions but there will be no announcement today,” a
committee spokeswoman said without elaborating further.

The recommendations will be put to the Group of Governors
and Heads of Supervision, chaired by European Central Bank
President Jean-Claude Trichet, which meets in the Swiss town of
Basel on Sunday.

Germany had held back from endorsing prior changes to Basel
III, hoping to win concessions on issues such as giving its
state-backed banks more time to upgrade the quality of a form of
non-voting bank capital known as “silent participations,” widely
used in the country.

However, a German source familiar with the talks said: “What
has been decided was not a consensus but a paper that most of
the members said would be a good compromise.”

The so-called Basel III reform is the cornerstone of the
world’s response to the financial crisis and endorsement by
Basel’s oversight body will pave the way for the G20 meeting in
November to give their seal of approval.

Germany’s Die Zeit newspaper reported on Monday that a draft
of the package showed banks would have to hold Tier 1 capital of
9 percent, including a 3 percent so-called “conservation
buffer”.

At least 5 percent of Tier 1 would have to be in the form of
pure equity or retained earnings for maximum market shock
absorbency. The current Tier 1 ratio minimum is 4 percent, with
a core pure equity minimum of 2 percent. [ID:nLDE6851V2]

The leak sparked some skittishness in Europe’s stock market
as investors refocused on how much capital banks may need to
raise and how this might hit dividend payments. [.EU]

ONEROUS END

Germany continued to press for more time to implement the
changes so its banks do not have to raise huge amounts of
capital quickly.

“We want a tightening of the rules … (but) the financial
sector must be in a position to continue to carry out its
business,” German Finance Minister Wolfgang Schaeuble said.
But Germany gave up trying to win blanket regulatory
recognition for “silent participations”.

“That battle is hopeless,” said one source familiar with the
talks, adding that the participations would no longer count as
core capital at joint-stock companies, while savings banks and
landesbanks without a joint-stock corporate structure would need
to meet a raft of new requirements to use them.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ European CDS widen as capital fears resurface [ID:nLDE6860JZ] BREAKINGVIEWS on Basel's capital buffer plan [ID:nLDE6860SJ] Q&A on Basel III rules finalisation [ID:nLDE6850Q0] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

Analysts and regulators have been expecting the new levels
to come in at around 6 percent for core Tier 1, with a
conservation buffer of at least 2 percent. [ID:nLDE6850Q0]

Any bank that failed to keep above the capital conservation
buffer would have to curb payouts such as bonuses and dividends.

Andrew Lim, an analyst at Matrix Group said the minimum
ratios outlined in the newspaper leak were at the more onerous
end of what the market had been expecting once the additional
buffers were added.

“This, we believe, is incrementally negative and is one of
the reasons why the market is weak today,” Lim added.

“Our analysis shows that BBVA (BBVA.MC: ), HSBC (HSBA.L: ),
Intesa Sanpaolo (UPIB.SJ: ), Unicredit (CRDI.MI: ) and Barclays
(BARC.L: ) would still be at risk of being in the conservation
buffer even by year-end 2013,” Lim said.

Banking and regulatory sources confirmed the Die Zeit
figures but said it was unclear if the figures were final.

“If the new core minimum is 5 or 6 percent then that looks
good. A majority of European banks would be definitely above
that level,” said Antonio Ramirez of Keefe, Bruyette & Woods.

Analysts said much of the impact would hinge on what quality
capital banks would be expected to hold in their extra buffers.

The Group of 20 leading countries agreed earlier this year
that its original end of 2012 deadline should include wiggle
room for countries to have more time to comply.
(Additional reporting by Alexander Huebner, Angelika Gruber and
Jonathan Gould in Frankfurt and Noriyuki Hirata in Tokyo;
Editing by Sharon Lindores)

UPDATE 3-Final Basel reform goes to oversight body