U.S., BRITAIN AGREE FURTHER BANK CAPITAL PROPOSALS The Bank of England and the U.S. Federal Reserve Board have agreed new proposals for joint standards to measure the risk of an array of credit exposures that do not show up in bank balance sheets, the Bank of England said. The plan, covering swaps, forward contracts and options involving interest or exchange rates, complements proposals agreed in January between the two central banks to make commercial banks in the U.S. And Britain subject to similar standards for measuring capital adequacy, the proposal said. It said no final decisions had been reached yet and banks have until April 16 to comment on the trunk proposals. The Bank of England and Fed said they had faced a dilemma. "On the one hand (we) are determined to require adequate capital support for potential future exposure -- on the other hand (we) are concerned that overly stringent capital requirements might unnecessarily affect the ability of U.S. And U.K. Banking organisations to price...Contracts competitively." At the basis of the new proposals lies the concept of the so-called credit equivalent amount - the current value of a currency or interest rate contract and an estimate of its potential change in value due to currency or interest rate fluctuations until the contract matures. In treatment similar to that agreed in January for balance sheet assets, the credit equivalent will be assigned one of five risk weights between zero and 100 pct, depending on the quality of the counterparty, the remaining maturity of the contract and on collaterals or guarantees to the contract, the plans showed. The proposal showed that collaterals and guarantees would not be recognised in calculating credit equivalent amounts. They would, however, be reflected in the assignment of risk weights. The only guarantees recognised are those given by U.S. And U.K. Governments or, in the U.S., By domestic national government agencies, the proposals showed. The paper said the proposed rules would not cover spot foreign exchange contracts and securities traded in futures and options exchanges. It said U.S. Regulatory authorities and the Bank of England were keen to encourage banks to "net" contracts -- consolidate multiple contracts with the same counterparty into one single agreement to create one single payments stream. It recognised that "such arrangements may in certain circumstances reduce credit risk and wish to encourage their further development and implementation," and said some of the current proposals may be changed to take this into account. The paper said the proposed rules would not cover spot foreign exchange contracts and securities traded in futures and options exchanges. It said U.S. Regulatory authorities and the Bank of England were keen to encourage banks to "net" contracts -- consolidate multiple contracts with the same counterparty into one single agreement to create one single payments stream. It recognised that "such arrangements may in certain circumstances reduce credit risk and wish to encourage their further development and implementation," and said some of the current proposals may be changed to take this into account.