Bank of England defers review of bank capital until global agreement

LONDON (Reuters) - The Bank of England won't consider imposing tougher balance sheet curbs on banks until global regulators have agreed a common definition.

A summary of discussions by the BoE's Financial Policy Committee, which is tasked with spotting risks to the broader financial system, said it "would return to these issues once an international agreement on the definition of the leverage ratio had been reached."

The leverage ratio requires banks to hold capital in proportion to their total non-risk weighted assets. It is currently set at 3 percent in Britain but some lawmakers want it set at 4 percent or higher to curb risks.

The global Basel committee of banking supervisors is meeting in Hong Kong on Tuesday and Wednesday and is expected to finalise a definition of the leverage ratio.

The Financial Policy Committee said it was also doing further work on whether big banks should adopt two methods for calculating the core capital buffers. Banks currently used so-called internal models but regulators suspect that some calculations are "gamed", or massaged to reduce the need for capital.

The FPC said it would cost banks a one-off 40 million pounds to also calculate capital buffers using the so-called standardised approach.

Minutes to the discussions, which took place on Nov 20, showed divergent views over forcing banks to use a standardised approach.

The main decision to head off the risk of a housing bubble by re-profiling the BoE's Funding for Lending scheme towards small businesses appeared to raise no disagreements.

(Reporting by Huw Jones and Christina Fincher)