First it was Switzerland; now two more European nations may push banks to tighten their capital holdings beyond that required by the Basel III framework.The Basel III rules adopted late last year require all banks to hold common equity, or "core Tier 1 capital", equal to seven per cent of their risk-weighted assets. Bankers criticised that figure at the time as too high, and some critics of the banking system warned against focusing on capital ratios as the key tool for improving the banking system.But ever since Basel III was approved, a group of critics have argued the seven per cent figure is too low.Switzerland has already moved to impose a 10 per cent core Tier 1 capital requirement on its two global banking giants, UBS and Credit Suisse.Last month, Adair Turner, chair of the UK Financial Services board, argued that "benevolent dictators... would be wise to choose capital ratios far above even Basel III levels, something more like the 15 per cent to 20 per cent of risk-weighted assets."Reuters reported this week that the UK's Independent Commission on Banking is widely expected to suggest banks hold core Tier 1 capital of 10 percent or more.The prospect of tougher ratios has prompted reports that both Barclays and HSBC are considering moving their headquarters out of the UK.Meanwhile, Italian newspapers have reported Italian Minister of Economy, Giulio Tremonti, as saying Italian banks should have a 10 percent core Tier 1 capital ratio. Italy's largest retail bank, Intesa Sanpaolo, is now expected to announce it will raise €5bn ($A7.0 billion) of new capital.There has also been a push to enlarge the group of SIFIs (systemically important financial institutions) that would be required to hold additional capital under Basel III rules. At its widest, this group could include Australia's Big Four banks.The push for higher ratios appears to be meeting some of its toughest resistance from US and French regulators. One US official reportedly told the Financial Times last week that "he was determined US banks would not be required to go much beyond the Basel III seven per cent ratio".In the short term, the discussion over SIFIs is the only aspect of this debate likely to impact on Australia's banking industry. Foreign banks operating here already set up their local operations as fully capitalised subsidiaries. And Australian regulators have tended to stress the importance of good supervisory conduct more than the specific Basel III ratios.But, in the longer term, the trend towards tougher rules will make it easier for the Australian Prudential Regulation Authority to impose tougher rules of its own. By pointing to foreign precedents for their own actions, regulators can ease political pressure against their actions. In recent times, APRA has shown it is particularly concerned about possible political opposition to the tough regulatory stances it might take in the years ahead.