Lloyds expecting a core capital requirement of 11 per cent

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Lloyds Banking Group expects UK regulators to require banks to hold a common equity tier 1 requirement of around 11 per cent under normal market conditions, chief executive Antonio Horta-Osorio said.

The bank, in which the Government has a 33 per cent stake, needs to convince regulators it has sufficient capital to start paying dividends again to boost the prospects of the finance ministry being able to sell off some of its holding to retail investors.

Lloyds, Britain’s biggest retail bank by market share, said in February that its core capital – a measure of financial strength – increased to 10.3 per cent last year.

Horta-Osorio said capital requirements in Europe and Britain were becoming better defined. Up to now, the Prudential Regulation Authority has set a minimum requirement of 7 per cent but investors have generally expected a ratio of 10 per cent.

Lloyds has said it will approach the regulator in the second half of 2014 about starting to pay dividends again for the first time since it received a £20.5bn government bailout in the 2008-09 financial crisis.

Horta-Osorio also said the bank was looking to expand in pensions, where it has a 10 per cent market share.

Chancellor George Osborne unveiled a far-reaching shake-up of the pensions system in the Budget last week.