The head of the European Central Bank has said an agreement on new global bank capital rules removes uncertainty and helps to consolidate the economic recovery.
Jean-Claude Trichet was speaking on behalf of central bankers meeting at the Bank for International Settlements in Basel in Switzerland.
The new capital rules brought relief to the world's banks today, although one of the architects said the sector would have to raise hundreds of billions of euro eventually. Irish bank shares rose strongly in Dublin.
The new requirements, known as Basel III, will demand banks hold top-quality capital totalling 7% of their risk-bearing assets but a long lead-in time eased fears that lenders will have to rush to raise capital.
The new capital ratio will be a substantial increase from the current requirement of 2%, but is significantly lower than what banks had feared earlier this year and comes with a phase-in period extending in some cases to January 2019. Banks in Europe are most likely to need to raise funds, especially in Germany, Spain and other weak spots.
'It will be hundreds of billions of euros,' European Central Bank Governing Council member and head of the Basel Committee on Banking Supervision Nout Wellink said.
But European bank shares rose at this morning's opening while the euro rallied against the dollar as the prospect of a rush to raise cash receded.
See how the Irish banking shares performed here
Banks will not be required to meet the minimum core tier one capital requirement, which consists of shares and retained earnings worth at least 4.5% of assets, until 2015. An additional 2.5% 'capital conservation buffer' will not need to be in place until 2019.
Top German lender Deutsche Bank is seeking a headstart on its rivals by announcing plans to raise almost €10 billion to bolster its capital. It said it would meet the Basel III rules by the end of 2013.
But there remains uncertainty over whether extra measures will be imposed on systemically important banks. A separate body, the Financial Stability Board, is due to make recommendations by November on options including possible surcharges to tackle the 'too big to fail' problem.
There will also be an additional counter-cyclical capital buffer of up to 2.5%, which national regulators will apply during periods of excess credit growth.
The long implementation period raised questions about whether heavy lobbying and the global economic recovery reduced regulators' resolve for harsher measures following the deepest financial crisis in decades.
The Basel III agreement was reached in Switzerland by central bank governors and top supervisors from 27 countries, after a year of discussions and lobbying that involved banks and governments seeking to protect their national interests.
Along with the capital standards, Basel III includes a range of reforms agreed earlier this year to reduce risk-taking by banks, including rules on how liquid banks' assets must be and how banks must treat tax assets on their books. Some changes were watered down in July after strenuous lobbying by banks.
Leaders of the Group of 20 rich countries and big emerging economies, blaming the global credit crisis partly on risky trading by banks, called on regulators in 2009 to work on tougher bank capital rules.
The G20 leaders are set to endorse Sunday's deal when they meet in Seoul in November.
