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* Banks say new rules would quadruple overall capital needs
* Basel says most banks unaffected by new rules
By Huw Jones
LONDON, Oct 20 (Reuters) - Banks will have to double theamount of capital they hold to cover possible default on theirpooled-debt under planned new global rules, they said onTuesday, potentially hampering the EU's drive to boostmarket-based financing for the economy.
Overall, capital held against trading books will on averagehave to quadruple, some 28 banks including Citi, DeutscheBank, Goldman, HSBC and JP Morgan said in a submission to regulators.
The banks' study challenges statements from globalregulators now finalising the rules that most lenders would belargely unaffected by a reform which is key to making thefinancial system more resilient to market routs.
The Basel Committee of banking supervisors from nearly 30countries is due to finalise its "fundamental review of thetrading book" (FRTB) in December. Banks have submitted data toBasel to quantify the impact of the rules that are likely tocome into effect in 2019.
Industry bodies, including the International Swaps andDerivatives Association (ISDA) ran the numbers themselves andsay the rules would quadruple how much capital banks must holdagainst trading books when calculated under the regulators' own"standardised" method.
The amount held against pooled or securitised debt, asecurity based on a pool of loans such as mortgages, woulddouble -- on top of increases that have already been introduced-- to well above possible losses under the FRTB, ISDA said.
The European Union has proposed to cut capital charges on"high quality" securitised debt in a bid to revive a market thatwas tarnished because of its central role in sowing the seeds ofthe 2007-09 financial crisis.
Banks provide most funding for companies in the EU and thebloc wants to boost the ability of markets such as securitiseddebt to raise money.
"We're concerned about the impact this will have on marketliquidity and various bank business lines," Mark Gheerbrant,head of risk and capital at ISDA, said in a statement.
"And the businesses that will be hardest hit will likely bethose most important for the real economy, such as credit tosmall- and medium-sized entities, securitisation and small capequities."
Many banks have pulled out of trading in some assets such ascommodities as a lower level of business and the cost of tougherregulation make it uneconomic.
Big banks use their own models for calculating capitalrequirements, which typically mean less capital is needed. Butregulators will require them to use the stricter standardapproach as well to set a "floor" on capital, irrespective ofwhat the models come up with.
The amount of capital held against trading books had alreadyrisen sharply under interim rules known as Basel 2.5. (Editing by Mark Potter)
