The Bank of England’s regulatory arm backed away from tough capital demands for bank-specific risks on Friday as it set out the detailed implementation of new EU rules.

Share prices of UK banks rose after the Prudential Regulation Authority said lenders’ of so-called Pillar 2A capital requirements will not have to be met entirely with the highest quality capital. Regulators tailor secret Pillar 2A requirements to cover each bank’s individual risks – including those associated with pension liabilities.

The move comes after banks urged the PRA not to pile on excessively onerous capital demands as it brings in EU-wide rules aimed at improving the resilience of the banking sector by implementing the new global Basel III standards. The PRA’s original proposals, published in August, prompted ferocious lobbying from the banks and building societies.

Shares in Barclays, which had been identified as heavily affected by the proposed reforms, rose 2.3 per cent as some analysts argued the regulator’s decision was not as tough as they had expected.

The PRA said in a new paper that it would impose the same mix of capital in Pillar 2A as for banks’ Pillar 1 requirements. That means UK banks will have to hold at least 56 per cent of their supplementary requirements in top-quality Common Equity Tier 1 (CET1) capital – not all of it.

Simon Hills, an executive director at the British Bankers’ Association, said: “The PRA have recognised that some of the risks they cover in Pillar 2A – notably pension risk – do not need to be covered by CET1 capital. This is helpful and makes sense, because this sort of risk only needs to be covered by gone concern capital – which is used to cover a situation when a bank goes into resolution.”

The PRA dismissed calls from some lenders that they should not have to hold any CET1 capital against pension risk.

Analysts at Exane BNP Paribas said the PRA’s announcement meant banks could face an equity tier one requirement of between 12 and 13 per cent but that further information was still needed.

The PRA has not yet finalised all the aspects of its rules, which implement a European directive called CRDIV.

Among its other decisions, the regulator said it would phase out the double-counting of capital held between subsidiaries in a banking group by 2019.

“These decisions will enhance the stability of the financial sector and strengthen the capital regime in the UK,” the PRA said.

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