Britain's banking regulator could be handed new powers to enforce government recommendations on how the country's largest banks should ring fence their retail and investment operations, The Sunday Telegraph reported.
UK finance minister George Osborne will signal a more accommodating tone on regulation at an annual dinner for bankers this Thursday, hosted by The City of London, where he is due to outline how the government will implement the Vickers report.
Osborne is expected to say that prescriptive regulation is not the best way to improve the safety of Britain's banks as he hands powers to the new Prudential Regulation Authority (PRA), which will be run by the Bank of England, to decide how much extra capital the retail arms of banks should hold to safeguard the sector, the paper says.
Britain has forced its banks, many of which needed taxpayer help during the 2007-09 financial crisis, to hold core capital equivalent to 10 percent or more of risk-weighted assets, well above global new rules that do not come into force until next year.
However, City of London officials are lobbying regulators, in particular the Bank of England's Financial Policy Committee (FPC), to state clearly what the tougher capital levels for banks should be and what this means for the economy.