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Warning on capital ratios



A decision by regulators to raise capital-adequacy ratios for banks worldwide would be "very dangerous" for the economic recovery, BNP Paribas chairman Michel Pebereau said yesterday.

"If regulators are going to decide globally, for all banks worldwide, whatever might be their activities, that they have to increase capital ratios, I am afraid it is not a good idea for the development of economies worldwide," Pebereau said at a briefing in Shanghai. "It would be very dangerous."

Requiring banks to set aside more capital would force lenders to reduce activities, which may stunt a recovery from the global recession, he added.

"During this crisis, it was not demonstrated that capital ratios were not sufficient for banks," Pebereau said. "It was demonstrated that for Chinese banks and French banks, it was possible to go through this crisis with the capital ratio that existed before."

BNP Paribas, France's largest bank by market value, in August reported a 6.6-per-cent increase in second-quarter profit, helped by the acquisition of Fortis assets and higher investment-banking revenue. The bank, which largely side-stepped the US sub-prime mortgage market collapse, has not been able to dodge the impact of the recession.



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