UK banks could need extra 50 bln pounds under 'Basel IV' - KPMG

By Laura Noonan

LONDON, Sept 12 (Reuters) - UK banks could need an extra 50billion pounds to deal with extra capital requirements beinglayered on top of the incoming 'Basel III' package of globalbanking regulations, consultancy KPMG warned on Tuesday.

KPMG said the introduction of a 'leverage ratio' thatrequires banks to hold a minimum level of capital against theirtotal assets, and restrictions on the way banks calculate the'risk-weighted' assets which figure in regular capital adequacyratios could together trigger the 50 billion pounds demand.

"The outlines of 'Basel Four' are already becoming visible,five years before the technical implementation deadline forBasel Three," said Giles Williams, partner in Financial Servicesat KPMG. "Care needs to be taken that the banks are not beingasked to do too much too soon."

In June the Prudential Regulation Authority (PRA) orderedfive of the UK's biggest banks, including Barclays,Lloyds Banking Group and Royal Bank of Scotland to raise another 13.4 billion pounds of capital, on top of the13.7 billion pounds they were already in the process of raising.

The demand, which was based on the banks' end 2012positions, was triggered by a more conservative treatment ofrisk weighted assets, higher estimates for future losses and theintroduction of a 3 percent leverage ratio.

KPMG's 50 billion pounds estimate is based on a commonequity leverage ratio of 5 percent and a 20 percent increase inbanks' risk-weighted assets, as regulators restrict the use ofinternal models that reduce risk-weighted assets, therebyboosting capital ratios.