Banks could face higher leverage ratio in 2018

City A.M. Reporter

BANKS could face a capital leverage ratio of four per cent from 2018, which would force them to cut lending further or hike capital levels even more.

Currently, the leverage ratio is three per cent, meaning banks can leverage their capital by up to 33 times. However, an influential panel of MPs said today that the rules should be far stricter, which could mean a higher ratio when the rules are reviewed in 2017.

"Our view is that at this time we should follow the international approach, to press for countries to have a power to set a higher ratio for 2018 following a review in 2017," said financial secretary to the treasury Greg Clark today, as part of a debate on banking reforms.