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PPI: Banks could hike loan rates following new regulations

UK banks could increase the rate of lending following the introduction of new banking regulations designed to prevent another financial crisis.

The new rules, called Basel III, state that banks will have to hold more money back to absorb losses, with firms required to have seven per cent of their loans and investments saved, compared to the present rate of two per cent.

This new figure will also include a 2.5 per cent 'conservation buffer' to protect banks against periods of hardship and insure they will not have to be bailed out by the government.

Angela Knight, chief executive at the British Banker's Association, claimed the new rules would bring an end to the "cheap money era" as it becomes more expensive to run a bank.

This will force financial institutions to make up for lost revenue by increasing the cost of borrowing for loans and mortgages.

The new laws, which will be ratified by at the G20 summit in November, will come into effect in several stages from 2013.

Posted by Jennifer Haines

Jennifer's speciality knowledge is credit card changes and balance transfers. ADNFCR-2776-ID-800063205-ADNFCR

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