By Huw Jones
LONDON, March 26 (Reuters) - The European Union willcontinue to diverge from global banking regulations wherenecessary to avoid overburdening smaller lenders, the bloc'sfinancial services chief said on Thursday.
European commissioner Jonathan Hill, in the job sinceNovember, said he would extend his predecessor's policy oftailoring global banking rules where justified.
The EU was singled out last December by global bankingregulators for departing from some elements of theinternationally agreed Basel III capital rules designed to makethe financial system safer. The rules also aim to aid comparisonof banks from across the world, but discrepancies make thisharder
Hill said he would "differentiate" from other Basel rules,too, in an effort to ensure that EU legislation is proportionateand takes into account different business models at banks acrossthe 28-country bloc.
"I don't want to burden smaller, lower-risk institutionswith the same requirements we need for bigger, riskier ones,"Hill told a financial conference in Brussels. "Looking ahead, Iam keen to build on this policy of differentiation."
Two key decisions on banking rules loom.
Hill has to decide by the end of next year whether all EUbanks should be set binding leverage ratios, a broad measure ofcapital to assets that are not risk-weighted.
Basel, which calls for a binding ratio, is deliberating overwhat level it should be set at. The global body also wants toset a net stable funding ratio, requiring banks to hold a bufferof long-dated bonds to cover potential liquidity crunches.
"In both of those areas, differentiation would be crucial,"Hill said.
Global regulators are finalising a separate rule to forcethe world's top 30 banks, including Deutsche Bank,Societe Generale and HSBC, to issue bondsthat can be written down if the lender gets into trouble.
Hill said he will first check whether the final detail ofthe global plans are "coherent" with a similar requirement theEU has already passed into law.
Brussels has argued that it needs to tailor Basel rulesbecause they are being applied to several thousand lenders inEurope while other parts of the world, such as the UnitedStates, apply them only to their biggest banks. (Editing by David Goodman)