FTSE boosted by bank shares

LONDON (AFP) – London equities steadied on Monday, with support coming from gains to banking shares after regulators relaxed rules on lenders’ capital buffers.

The FTSE 100 index of top companies dipped 0.10 percent to 6,733.39 points in midday deals compared with Friday’s closing values.

“The financial heavyweights were helped higher by a decision by regulators to relax the Basel ruling on capital requirements, giving them some welcome breathing space and hopefully a potential boost in returns,” said CMC Markets senior trader Toby Morris.

Central banks have agreed to relax a key provision of reforms instituted after the global financial crisis to strengthen commercial banks.

The Basel Committee, which oversees the implementation of reforms that will be applied in 27 countries, issued amendments late on Sunday of how the so-called leverage ratio will be applied.

Banking shares rallied in reaction with Barclays advancing by 2.63 percent to 291.05 pence.

As part of their business of lending banks acquire more assets, or risks, than the capital they hold, and this ratio is called leverage.

As part of the reforms being introduced following the 2007 crisis, regulators wanted banks hold more capital in case of losses, thus have a lower leverage ratio.

The Basel III reforms, which are being implemented over the coming years, require banks limit assets to three times the amount of capital.

There have been concerns that unless banks raise huge amounts of capital lending could be crimped, as well as how lots of trade finance operates.

Changes proposed on Sunday allow banks to exclude much of their short-term finance operations by offsetting transactions, and recording only their net positions as opposed to their gross exposure for the purpose of calculating the leverage ratio.

In other markets, Asian stocks diverged on Monday after a worse-than-expected jobs report from the United States.