President of German Association Comments on Basle II

August 21, 2007 (LPAC)--Werner Kuesters, the President of the German Association of the Service Economy issued, in a letter to German banks, an appraisal of the Basle II reforms (established by the BIS, which set up risk and capital management requirements designed to ensure that a bank holds capital reserves appropriate to the risk to which the bank exposes itself):

"In the Mittelstand, anger is raging. While banks use the catch phrase Basel II to broadly restrict credits to small and middle-sized firms, they engage themselves in billion dollar worthless credits abroad...'Rating' is the unspeakable magic word with which one mobbed the Mittelstand and frequently drove them out of business...Obviously this highly praised rating system has now completely failed. Such a crisis as unleashed by Basel II had never happened before."

Germany's large public-owned banking sector including savings and loans (Sparkassen), state banks (Landesbanken), and the federal Kreditanstalt fuer Wiederaufbau (Kfw) has been drawn into rescue-packages near 40 billion Euro for foreign speculative ventures (IKB, Sachsen LB).