Pressure mounts to ease challenger capital rules

Author: Danielle Myles | Published: 26 Jan 2016

Challenger banks have slammed new Basel proposals that could force them to hold five times as much capital as their bigger competitors.

With the backing of UK and German regulators, they are confident the draft changes will be defeated, and hope the Capital Requirements Directive (CRD IV) will be pared back to ease the burden on smaller lenders.

For years small and mid-tier banks have criticised the EU’s decision to subject to them to the full weight of Basel III, while their counterparts in the US have largely been exempted. But concerns have spiked since December 10, when the Basel Committee began consulting on its revisions to the standardised approach to credit risk.

The paper suggests hiking charges for buy-to-let mortgages and loans to residential property developers for banks that don’t use an internal risk-based (IRB) approach to capital measurements.

The changes, which will only capture smaller banks,...