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Implementation of Basel II leads to zero risk weight for Rentenbank issues

20 December 2006

With the introduction of the new Solvency Regulation (Solvabilitätsverordnung, SolvV) as of 1 January 2007, German banks will no longer have to back their holdings of Rentenbank issues with equity capital. According to § 28 of the Solvency Regulation, funding raised by Rentenbank will be treated equal to issues of the Federal Republic of Germany for risk weighting purposes. The new regulation transforms the Basel II rules which stipulate significantly more risk-sensitive capital requirements than the previous guidelines into German law. Due to the amended EU Banking Directive, the German decision to zero risk-weight claims on Rentenbank also applies to other European banks within the scope of the Banking Directive which use the standard approach. In countries outside the EU it will be within the discretion of the national supervisors to adopt the zero risk weight introduced in Germany.

Landwirtschaftliche Rentenbank, Frankfurt, is a direct federal institution under public law with a mandate to promote agriculture and the rural areas. The bank funds predominantly on the international capital markets via loans or through the issuance of debt securities. Rentenbank's unsecured and subordinated long-term obligations are triple A-rated by Standard and Poor's, Moody's Investors Service and Fitch Ratings.

 

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