Thursday, February 2, 2012

Senior Italian Regulator says that higher bank capital requirements risk making situation worse

According to a Reuters' article, the head of Italy's bourse regulator voice his concern over higher bank capital requirements and observed that they risk damaging investor confidence.

So now damaging investor confidence can be added to igniting a credit crunch on the list of reasons why higher bank capital requirements in the absence of ultra transparency is a bad policy.

Further bank capital increase requested by the European Banking Authority (EBA) risk denting investor confidence, Giuseppe Vegas, head of Italy's bourse regulator Consob said on Thursday. 
"At the moment, the prospect of further, strongly dilutive capital increases risks not only making raising new capital difficult but creating a climate of mistrust among investors which, in the last analysis, could compromise the attractiveness of our shareholder system," he told a Senate hearing. 
He said there was a need to consider extending the deadlines for EBA's capital requirements, which force banks to strongly bolster their capital reserves.

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