Nationwide could be exempt from the toughest lending rules

 
Tim Wallace
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BUILDING societies like Nationwide could get a break from the toughest new lending rules, as the Banking Commission realised their models would be hit hard by a tighter leverage ratio, it emerged yesterday.

MPs and peers have been pushing the chancellor and regulators hard to impose a four per cent leverage ratio on lenders, up from the three per cent currently coming in.

That would reduce leverage from 33-times core capital – a three per cent ratio – to 25-times, a four per cent ratio. It is intended to strip out the uncertainties around accurate risk weightings, providing a crude but clear cap on lending of banks for a given level of capital.

But it also harms building societies – the Nationwide’s leverage ratio was 2.5 per cent at the end of last year – despite their lending being viewed as particularly safe.

Opponents of a four per cent limit cite this as a reason to stop it. But the Banking Commission favours a range of exemptions, instead.

“If problems are created for banks with particular characteristics, they should be addressed by specific derogations not by reducing the leverage ratio for all banks,” its report said.