European bank shares rise after regulators agree strengthening steps

Barclays was up nearly 3%, one of several banks whose shares rose after the announcement by a gathering of central banks in Basel, Switzerland. Photograph: Oli Scarff/Getty Images

Shares in European banks rose on Monday – edging towards three year highs – after international banking regulators reached agreement on new steps to bolster the industry's financial strength.

Barclays was up nearly 3%, and bailed out banks Royal Bank of Scotland and Lloyds Banking Group up 3% and 1% respectively after the announcement by a gathering of central banks in Basel, Switzerland. Deutsche Bank was up more than 4% and UBS, the Swiss bank, gained 3.2%.

The key announcement in the complex agreement was about the leverage ratio – which attempts to restrict the amount of borrowing by banks – and which has become a new focus since the 2008 banking crisis. As expected the ratio was set at 3% – which allows banks to lend 33 times the amount of their capital – but some changes were made to the way the banks can calculate their assets.

Complying with this rule was one of the reasons Barclays was forced to raise £6bn of new capital last year. Ian Gordon, banks analyst at Investec, said: "The devil is in the detail, but in particular it offers potential relief around counterparty netting and off-balance sheet items. While positive for certain European banks, the benefit for UK banks is less clear given UK 'super-equivalents' (stricter interpretation of the rules)."

The agreement clears the way for the Bank of England to consider the terms of a review of the leverage ratio demanded by Chancellor George Osborne last year