HIGHLIGHTS-Bank of England's Carney speaks on UK bank capital rules

LONDON, Dec 1 (Reuters) - Bank of England Governor Mark Carney and other officials from the central bank were speaking on Tuesday after the BoE said it would require banks to hold as much as 10 billion pounds extra capital, but stopped short of immediate action.

CARNEY ON IMPROVEMENT IN BANK RESILIENCE

"UK banks are significantly more resilient now than they were before the financial crisis. Capital (Other OTC: CGHC - news) requirements for the largest banks have increased ten-fold, their holdings of liquid assets have increased four times, their trading assets are down by a third, inter-bank exposures are down by two thirds. And the result of the Bank's 2015 stress tests underscores these improvements."

ON THE COST OF UNCERTAINTY ABOUT CAPITAL RULES

"While the benefits of increased resilience are clear, higher capital costs are ultimately passed on to borrowers and uncertainty about the final resting place for capital can prevent banks from taking the types of prudent risks that the economy needs to create jobs and to grow incomes."

"There is no new wave of capital regulation coming, there is no Basel IV. Our objective has never been to raise capital without limit or to raise it by stealth."

ON CHALLENGES FOR BANKS

"The global environment is unforgiving, and the legacy of the crisis means private and public balance sheets remain stretched. This calls for resilience not fatalism. Today we have reaffirmed the strength of our banks in the face of these risks. We are providing additional certainty about the shape of the capital framework and the amount of capital required. We are setting out how macro-prudential capital buffers will be used to match resilience with risks."

ON ECONOMIC IMPACT OF CAPITAL RULES

"The principal purpose of this buffer is to increase resilience of the banks and to be even clearer the primary purpose is not restraining credit growth. Now (NYSE: DNOW - news) , we recognize that in the process of increasing capital requirements, there will be costs passed on to borrowers. That will have an impact on output, on demand, on output and ultimately some impact on inflation. The question is the order of magnitude of those changes. To give you a rough sense of that, all things being equal, a one percentage-point increase in the counter-cyclical capital buffer has on the order of magnitude about a 10 basis point, 0.1 percent impact on GDP growth, the level of GDP after three years. That's quite a marginal impact. There is some uncertainty around those levels."

ON MOVES IN THE CCB

"Just to be clear, the counter-cyclical buffer can only be in increments of 25 basis points, or maybe 25 basis points or maybe 50 basis points."

ON WHETHER THE GOVERNMENT'S CALL FOR BANK TO CONSIDER COSTS OF REGULATION WILL LEAD TO A WATERING DOWN OF RULES

"Absolutely not. There is no change in the statute. There is no change in our responsibilities to promote financial stability, we will continue to take our decisions, the responsibility for financial stability rests clearly with the FPC and I can assure you that all of its members fully recognise the weight of that responsibility and we will do whatever is necessary to promote financial stability in a way that is promoting strong, sustainable and balanced growth. We won't increase capital without limit, but we will make sure that this system is adequately capitalised for plausible but severe stress scenarios. You can make your judgments based on what we have been doing there."

ON LIMITED AND GRADUAL INCREASES TO INTEREST RATES

"The most likely scenario, and this is the judgement of everybody on the Monetary Policy Committee, is that interest rate moves, when they come, will be limited and gradual... because of a variety of headwinds that are affecting the economy. So that means effectively that these types of macroprudential risks could be present and the FPC has to be particularly vigilant. The more vigilant the FPC is, the more effective -- maybe is a better way to put it -- the FPC is, the greater confidence the MPC (KOSDAQ: 050540.KQ - news) can take that it doesn't have to use monetary policy to address financial stability risk."

(Reporting by UK bureau)