Britain has warned its European Union partners not to water down rules that will force banks to build up larger safety cushions or to stop member states from requiring extra buffers.

The EU is turning a global accord on bank capital known as Basel III into EU law but some countries want greater flexibility, arguing that not all the EU’s 8,000 lenders have the same business model. Banks would have to hold core capital equivalent to at least 7 per cent of their risk-weighted assets by 2019.

“It is vital that we resist any attempts to unpick this agreement in Europe through the capital requirements directive,” Britain’s financial services minister Mark Hoban said in a speech during a visit to Brussels.

He also warned against allowing overly flexible interpretations to allow lenders to scale back how much capital they must hold to withstand troubled markets. “It is why we fully support the European Central Bank’s amendments to rectify the problems of double counting of insurance capital which, as currently constructed, render the capital surcharge irrelevant for some of Europe’s largest banks,” Mr Hoban said.– (Reuters)