Basle III agreement spares UK banks from fresh cash calls

British banks looked last night to have escaped the rigours of tougher new capital funding rules designed to prevent any new global financial meltdown.

• Jean-Claude Trichet chaired the meeting in Switzerland

The agreement was hammered out in Switzerland by central bank governors and top regulators from 27 countries, chaired by European Central Bank president Jean-Claude Trichet. "There is a deal," one source said.

Sources said the so-called tier one capital ratio for banks was likely to have been raised from the current 4 per cent to between 7 and 9 per cent.

The ratio is a measure of banks' financial cushion against sour loans and losses, and British banks already have core tier one ratios of about 8 to 9 per cent.

This would make the likes of Barclays, Lloyds Banking Group, Royal Bank of Scotland and HSBC highly likely to comply with the new rules pushed through at the meeting of the Bank for International Settlements yesterday.

The agreement still needs to be ratified by the heads of government of the G20 group of nations at their summit in November.

It came as Deutsche Bank, Germany's biggest bank, said it planned to raise at least €9.8 billion (8.1bn) in a capital increase and make a full takeover offer for retail lender Deutsche Postbank.

The move is Germany's largest banking rights issue but is dwarfed by sums recently raised by Lloyds, HSBC and RBS.

Deutsche Bank currently owns 29.95 per cent of Postbank shares.

Commenting on yesterday's talks in the Swiss city of Basle, one City analyst said: "This is designed to protect the world's banks from major future downturns by making them inherently financially stronger.

"It is obviously necessary given the credit crunch of 2007 and the turmoil in the sector in 2008, but British banks were already well ahead in repairing their balance sheets.

"In fact, some in the UK, US and Switzerland have actually been pushing for core ratios of 10 per cent, well above what is likely to have been decided in Basle."

Low levels of capital relative to loans were a major component in the global financial crisis.

However, some analysts say even the tightening of capital requirements decided on in Switzerland could still hit a weak economic recovery in mainland Europe as banks rein in lending because they have too little capital for the loans they have already made.

The finer details of the so-called Basle III reform were agreed in July, leaving yesterday's meeting to add the final two pieces in the jigsaw - how much extra capital will be required and how long banks have to comply.

Any bank that fails to keep above the new capital buffers would have to curb payouts such as bonuses and dividends.