The Financial Services Authority in the UK may not implement the Basel III capital standards as vigorously as previously planned.
The Financial Times reported that UK banks will no longer be required to maintain a core equity ratio of more than 10 per cent of their risk-weighted assets by the end of next year.
Instead, individual UK banks have been set numerical targets for capital and have been told their ratio can drop below 10 per cent in the meantime, the FT reports.
The FSA confirmed the new policy to the newspaper.
The rationale for the shift in policy is the macroeconomic policy goal of stimulating lending in Britain's low growth economy.
The absolute number means banks cannot meet regulatory targets by cutting lending; the flexibility on the ratio gives banks room to expand lending as demand grows, the FT reported.
A report by the Bank for International Settlements this week described the Basel III implementation in Britain as "in force" and "completed".
- Basel III capital rules diluted in UK
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11 October 2012 6:48am
