Planned increases to bank capital requirements risk creating a new credit crunch affecting many markets, ANZ's managing director, Mike Smith, warned yesterday. Speaking at the Commonwealth Business Forum in Perth, the ANZ chief argued Australian regulators need to slow down their own timetable for adopting the Basel III capital rules. "There is a real possibility that overly conservative rules with an aggressive implementation timetable are likely to have a choking effect on global recovery," Smith said. Of the local approach, Smith said: "In Australia, it is also difficult to see why we would seek to lead the world in implementation of these proposals at a time when the global consensus on Basel III is arguably fragmenting." The ANZ chief's comments put him sharply at odds with the Australian Prudential Regulation Authority's chairman, John Laker, who just last Friday rejected claims that Australia was moving ahead of the rest of the world on Basel III capital requirements. Smith said that while "a supporter of the concept of Basel III… I'm increasingly concerned that its implementation is moving ahead at a time of great economic fragility and uncertainty, without sufficient global consistency, which was its core rationale, and without enough thought given to the macroeconomic implications of the reforms on individual economies or what model might suit what situation." "Last week the International Monetary Fund warned that the forces that caused the Great Depression in the 1930s are again at work, as households, businesses and governments simultaneously cut back their spending, and deleverage their balance sheets.    "If you add to that the prospect of a credit crunch as banks seek to achieve higher bank capital and liquidity ratios under Basel III through aggressive reductions in lending to retail customers and to business, then, at best, I fear a significant slowdown to the global recovery." Smith pointed to estimates by the Institute of International Finance that banks in leading economies will have to raise as much as US$1.3 trillion of capital to meet all the new regulatory requirements. European banks also require a further US$200 billion in capital, Smith said, to respond to European sovereign debt problems (though alternative estimates are for about half this amount). Smith did note that regulators showed a degree of flexibility around Basel III, pointing to a change announced by the Bank for International Settlements this week that will require less capital for trade finance facilities. "There is nothing seriously broken in Australia that needs fixing," Smith said. "And the same could be said of much of the developing world. "With so much at stake though, I believe a slower, more considered path to implementation, which is coordinated with the responses needed to the many other issues in the global economy, is necessary." In a discussion paper last month, APRA set out plans to accelerate by as much as two years the Basel Committee's proposed transition timetable for increases in capital ratios. That