EU mulling lighter lending rules for banks: report

(PARIS) - The European Union is mulling lighter rules on banking reserves in a development that could see regulators stand accused of buckling to industry pressure, the Wall Street Journal reported Thursday.

The newspaper quotes sources sources close to negotiations as saying that European regulators might accept a broader range of assets among reserves that banks are required to maintain to protect themselves in crises.

Beyond cash deposits and high-quality government bonds, a source said assets like gold, blue-chip stocks and mortgage-backed securities might qualify if the changes are accepted.

"There's definitely a live debate about it," the report quoted Standard Chartered chief executive Peter Sands as saying.

"Having too narrow a category of assets, however theoretically pure they are, is just a bad idea," Sands added. "I would much prefer to have a broader range."

An unidentified senior regulator said: "I think there's a more legitimate debate about ... whether we might have to think a little more flexibly."

International regulators have sought to ensure that banks have a strong safety net in place in case they need to sell assets quickly to fund daily operations or deal with widespread withdrawals by depositors.

Lack of adequate reserves is believed to have been a key factor in the freezing up of interbank lending markets after the US investment bank Lehman Brothers declared bankruptcy in September 2008.