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Euro rules posing a threat to UK banks

Smaller UK banks face being snapped up by bigger players in Europe because of new capital adequacy requirements, according to UK lenders.

The Basel Accords, or Basel II, set to be finalised at the end of next year and implemented in 2007, may cut the level of funds that organisations have to hold, based on their risk rating.

At a recent briefing on Basel, Britannia Building Society warned that “converted societies may be snap-ped up by overseas predators” using the released capital to fund acquisitions. It said global banks will be able to move faster than UK organisations to develop cheaper products and “clean up”.

Britannia said Basel II will potentially present more of a challenge to regional societies but says the Building Societies&#39 Association is looking at how the sector can work together to meet requirements.

The BSA says it is talking to consultancy KPMG about its members taking a consortium approach by pooling financial data to allow their risk rating to be calculated collectively.

Britannia group chief internal auditor Ian McKilligan says: “Britannia supports Basel and sees some potential benefits but there are a number of issues, including the effect on competition. Globally, active banks can move faster than we can.”

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