UK gives banks capital relief under home loan scheme

LONDON, Oct 8 (Reuters) - Banks taking part in Britain's newscheme to encourage home-buying won't have to set aside capitalto cover the state-backed portion of mortgages they offer aspart of the programme, the Bank of England said.

Under the government's Help to Buy scheme, which launches onTuesday, home-buyers may deposit as little as 5 percent to buy ahome and the government will guarantee up to 15 percent of theloan.

"The guaranteed portion of the loan would be treated as anexposure to the UK government," the BoE's Prudential RegulationAuthority said in a statement.

Banks would only have to set aside capital on thenon-government backed portion of a mortgage, the PRA added.

So far, RBS and Lloyds and some smallerlenders have said they will participate in the scheme and otherbig banks were waiting for more details, chief among them howthe capital relief will work.