SINGAPORE, Feb. 26 (XFNAsia) Lower capital charges on consumer loans under a new capital framework dubbed, Basel II, may result in more lending by Asian banks in the home mortgage and credit card sectors, Fitch Ratings Asia Financial Institutions managing director David Marshall said.

Under Basel II, capital charges on residential mortgages go down to 2.8 pct from 4 pct. Capital charges for credit cards and other retail loans will be reduced to 6 pct from 8 pct as set out in the old capital adequacy framework.

Basel II is an international capital framework requiring banks to assign ratings to differentiate the credit quality of assets they hold. Consequently they must then assign differing levels of capital to cover the varying risks.

This is intended to bolster the risk management system of banks.

Once implemented, the risk-weighted capital ratio of banks is expected to come down across Asia, Marshall said.

Hong Kong and Singapore have the most stable banking systems in Asia and had a correspondingly high risk-weighted capital ratio of 15.9 pct as of September 2004.

Marshall said most bank supervisors in Asia are expected to implement the Basel II standard as key part of their bank supervisory regimes with larger banks seen adopting a more stringent Internal Ratings Based (IRB) approach.

In Singapore, two of the three banking groups are expected to subscribe to the IRB approach starting 2007, Fitch Ratings said.