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New operational risk rules put some banks under pressure 

March 9, 2016


Stricter rules on how banks calculate the amount of capital they need to cover risks from fines or other parts of their operations are likely to see some banks need to bolster their balance sheets.

The Basel Committee of global regulators on Friday set out proposals for how banks assess operational risk, another step in their attempt to limit the ability of big banks to use their own models to cut the amount of capital they need.

"While the objective of these proposals is not to significantly increase overall capital requirements, it is inevitable that minimum capital requirements will increase for some banks," said Stefan Ingves, chairman of the Basel Committee.

That could include Deutsche Bank and others who face higher litigation costs, according to analysts at Morgan Stanley.

"We think Deutsche Bank has the most risk for operational risk weights to rise, given its litigation outlook," Morgan Stanley analyst Huw van Steenis said in a note.

In all, however, analysts said the proposals were not as severe as a previous draft and will have a more modest impact on bank capital than many had expected.

"Although this is negative news for the sector, it was expected by us and the market ... the amended version is a better-than-expected outcome," analysts at Credit Suisse said on Tuesday. Read more

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