International fallout from Lehman $300 billion: German regulator

"We're still licking the wounds of Lehman," said Jochen Sanio, president of the German Federal Financial Supervisory Authority (BaFin), at an international banking conference. "It caused international damage of $300 billion outside the U.S."

The U.S. government allowed investment bank Lehman Brothers to file for bankruptcy protection on September 15 instead of trying to intervene as it had done with peer Bear Stearns and later did with giant insurer American International Group .

Banks will face tougher rules on regulatory capital and financial oversight in the wake of the global financial crisis, Sanio said.

"The financial crisis brought to light serious shortcomings in the regulatory framework," Sanio said.

"This time it won't come down to a new round of self-regulation by banks," he said, adding that the credibility of regulators was at stake.

The BaFin chief said there was a need to toughen rules on regulatory capital and liquidity requirements, with the international capital framework for banks known as Basel II in particular in need of sharpening.

Sanio criticized internationally active banks for having shifted their risks overseas "repackaged several times over."

The German government last week had to rescue property lender Hypo Real Estate with a 50 billion euro refinancing package. Other German commercial banks such as Deutsche Bank , Commerzbank and Dresdner Bank have also suffered big writedowns in the crisis.

Several of the country's state-sector regional wholesale banks have also been hit.

Banking supervisors needed better international coordination to overcome problems in oversight, Sanio said.

(Reporting by Philipp Halstrick and Karey Wutkowski; Writing by Jonathan Gould; Editing by Theodore d'Afflisio and Erica Billingham)