Small lenders could get help with simpler capital calculations

Tim Wallace
Follow Tim
THE COMPLEX system of calculating banks’ capital requirements could be made simpler under proposals in a consultation launched by global regulators yesterday.

The Basel Committee is considering reducing the scope for big banks to set their own risk weightings on loans.

Such a move could have the dual benefits of making it easier to decide how much capital a bank needs, and making it easier for small banks to compete by reducing the enormous gap between them and large banks.

The international regulator is also considering standardising the way banks report their capital and leverage ratios.

It comes after study by the British authorities found banks may be under-reporting capital levels, giving investors a false view of the risks they are running.