Europe banks cheer easing in leverage rules, shares rally

Mon Jan 13, 2014 7:34am EST
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By Huw Jones and Steve Slater

LONDON (Reuters) - Deutsche Bank (DBKGn.DE: Quote) and Barclays (BARC.L: Quote) led European bank stocks on Monday to their highest for nearly three years after regulators watered down new rules aimed at strengthening banks but which could have limited their ability to lend.

Sunday's decision by the world's top central bankers was aimed at trying to avoid restricting financing for the global economy, and was seen as a positive for banks, especially those with big investment banking arms.

The easing of the rule, after lobbying by banks, is the latest sign of how regulators have become more willing to accommodate lenders as the focus switches to helping economic recovery.

The STOXX Europe 600 Banking index was up 1.4 percent at 205.2 points by 1100 GMT, its highest level since April 2011 and extending this year's rally to 6 percent. The index is up 26 percent since the start of 2013.

Shares in Deutsche Bank and Barclays were each up more than 3 percent, and UBS UBSN.VX, Unicredit (CRDI.MI: Quote) and Royal Bank of Scotland (RBS.L: Quote) were each up more than 2 percent.

"The significant regulatory forbearance ... should go some way towards alleviating concerns on the leverage ratio, notably at Barclays and Deutsche Bank," Kinner Lakhani, analyst at Citi, said in a note.

The leverage ratio rules, due to come in from 2018, act as a backstop to a lender's core risk-weighted capital requirements. A ratio of 3 percent means a bank must hold capital equivalent to 3 percent of its total assets.

CONCESSIONS   Continued...

An illuminated euro sign is seen in front of the headquarters of the European Central Bank (ECB) in the late evening in Frankfurt January 8, 2013. REUTERS/Kai Pfaffenbach