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Regulators look ahead to 'Basel 4'

The UK’s eight largest banks could have to hold £50bn more capital if regulators decide that it is necessary to go beyond Basel 3 rules, according to KPMG’s research.

Although the 2019 implementation deadline for Basel 3 is still five years away, there are signs that regulators will push for tougher capital standards. This could include a higher minimum leverage ratio; restrictions on banks' use of internal models to calculate their capital requirements; and more disclosures by banks.

If the UK’s largest eight banks maintained the same asset base then they might have to hold an additional £50bn on top of the £260bn they already need to set aside under Basel 3, according to KPMG estimates. This level of additional funding might not be available, which would force banks to deleverage further.