Europe’s co-op banks face capital hit from new Basel rules

Sharp increase in risk weight for strategic equity stakes will capture ownership of apex banks

REG Basel III feature - DekaBank-DZBank-Montage-WEB.jpg
Holdings in apex banks such as DekaBank or DZ Bank will attract greater risk capital
DZ Bank/PA Images/Infopro montage

The final Basel III package of banking reforms agreed in December 2017 was intended to target regulatory arbitrage at the world’s largest banks, but it could instead create an unlikely victim: European co-operative and savings banks that style themselves as secure, low-risk institutions.

Many of these smaller banks, which exist as independent entities grouped under a single umbrella institution known as an apex bank, claim their risk-sharing structure promotes financial stability.

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