EU banks watchdog says Basel rules will be eased

LONDON (Reuters) - Global regulators will make significant changes to ease the impact of new bank capital rules and the European Union should not turn its back on the talks, the bloc's banking watchdog said on Wednesday.

EU officials have threatened not to apply the new bank capital rules if they lead to big hikes in capital requirements, fearing it could lead to banks restricting the flow of lending to the economy.

Andrea Enria, chairman of the European Banking Authority, said he expects the Basel Committee of global banking supervisors to make big changes to ease the impact of the planned rules.

The Basel Committee meets later this month to finalise the rules.

"I am confident that... will lead to significant revisions to the original reforms package, and I expect the final proposal will be much closer to what we think they should be," Enria told the European Parliament's economic affairs committee.

He urged the EU not to "leave the room" when Basel meets this month.

"If you look at stock market valuations of European banks, if we don't tighten standards... then this won't reflect well on European banks," Enria said.

(Reporting by Huw Jones; Editing by Keith Weir)