EU states some margin on bank capital

LONDON: Britain and other European countries will have some discretion to top up capital levels above international standards, a leading banking regulator said on Wednesday.

Andrea Enria, chairman of the European Banking Authority (EBA), said he expects the European Commission to ask the EBA to standardise rules across Europe's banks for capital.

"This flexibility needs to be there, but in my view should be constrained discretion," Enria said on the sidelines of the British Bankers' Association (BBA) annual conference in London. But he said national leeway would not be unlimited.

"If you have more inter-connection, more risks, more macro-prudential risk there could be some justification for having more flexibility, but there has to be a framework."

Bank of England Governor Mervyn King and UK financial services minister Mark Hoban have called repeatedly in recent weeks for the European Commission not to turn the planned Basel III global minimum capital requirements into common maximum levels in the 27-nation bloc.

Britain, which was forced to shore up many of its banks in the financial crisis, wants leeway to slap any additional capital requirements above international norms that it sees fit to address risks.

Enria said he expects the EBA to also be given authority over standardising compensation, liquidity and reporting standards across the industry.

Separately, Marcus Agius, chairman of the BBA and Barclays warned in a speech it is "completely unrealistic" to expect bank sector investors to be satisfied with utility industry type returns.

Copyright Reuters, 2011