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BASEL, Switzerland/AMSTERDAM (Reuters) - New capital rules set by global regulators are expected to give weak lenders time to raise funds and free up strong banks to lift dividends or hit the acquisition trail.
But the biggest international banks still face a capital surcharge on top of Basel III rules announced late on Sunday, to tackle concerns that banks deemed "too big to fail" may take risks that could derail the financial system.
"The (Basel) agreements certainly reduced probability of failure for systemically important banks, but it doesn't resolve the moral hazard problem as these banks are too big or too interconnected to fail," said Mario Draghi, governor of the Bank of Italy and head of the Financial Stability Board (FSB).
The surcharge drew some protests on Monday, as Societe Generale Chief Executive Frederic Oudea promised to fight the proposed extra capital burden.
But many investors globally welcomed the long lead-in time for the implementation of the new rules, and shares of bank stocks rose in Europe and the United States.
The rules also eliminate uncertainty for many banks, which could help them better plan how to boost revenue amid an unusually uncertain economic outlook.
Banks in Europe -- most notably in Germany and Spain -- could need to raise large amounts of funds, while most U.S. banks already comply with the rules, analysts said.
The new Basel III requirements will force banks to hold top-quality capital totaling 7 percent of their risk-bearing assets, more than triple what they do now.
The capital levels are significantly lower than what banks globally feared earlier this year and lenders will have until January 2019 to comply with some of the rules.
In Europe, banks' capital raising requirements "will be hundreds of billions (of euros)," European Central Bank Governing Council member and head of the Basel Committee on Banking Supervision Nout Wellink told Dutch NOS Radio 1 Journaal.
ECB President Jean-Claude Trichet said regulators struck a good balance between strengthening capital while allowing lenders to lend, but said it was "a work in progress."
Top German lender Deutsche Bank is seeking a head start by announcing plans to raise almost 10 billion euros to bolster its capital. It said it would meet the Basel III rules by the end of 2013.
Major bank executives in the United States did not appear concerned about complying with the new rules.
"We are very comfortable with these targets," Citigroup Chief Financial Officer John Gerspach said in an email to employees obtained by Reuters.
Gerspach added: "The Basel III agreement ... begins to create needed certainty."
More certainty could help catalyze consolidation among the nearly 8,000 banks in the United States, NAB Research analyst Nancy Bush said in an interview.
"M&A was not going to happen without a better grasp of the capital ratios," she said.
The rules helped boost shares of U.S. regional banks, including Regions Financial Corp and Zions Bancorp, which were some of the top performers among bank stocks after Sanford C. Bernstein raised their ratings to "outperform."
Banks will not be required to meet the minimum core Tier 1 capital requirement, which consists of shares and retained earnings worth at least 4.5 percent of assets, until 2015.
An additional 2.5 percent "capital conservation buffer"will not need to be in place until 2019. There will also be an additional counter-cyclical capital buffer of up to 2.5 percent, which national regulators will apply during periods of excess credit growth.
When regulators issued an initial consultation document last year the new rules were expected to come into force by the end of 2012, but banks urged delay, citing worries that a speedy introduction would hit a fragile economic recovery.
Most banks in Asia, outside Japan, have capital levels well above the minimum levels under Basel III. Shares in Japanese banks, which have slightly lower levels, also rose.
"It's no big bang for banks, not with a phase-in arrangement of five years," said Commonwealth Securities analyst Craig James.
Banks that will benefit from the longer transition period were among the top gainers in Europe, with France's Credit Agricole up 5.8 percent.
Elsewhere, many top banks in Canada, the Nordic and Benelux regions, Britain and Switzerland have a more comfortable capital cushion and clarity on Basel rules could see them become bolder in reinstating or raising dividends or seeking acquisitions, investors and analysts said.
Credit Suisse analysts saw 7 percent as the bare minimum for core Tier 1 capital, 8 percent as the standard for adequately capitalized banks and 10 percent the level at which surplus capital could potentially be returned to investors.
Swiss and British banks will be among those facing extra measures imposed on systemically important banks. That could include "combinations of capital surcharges, contingent capital and bail-in debt," Sunday's statement said.
French bank SocGen will "absolutely" meet minimum capital requirements, but "we will fight" the surcharge, CEO Oudea told investors at a conference on Monday. He said he did not see why large banks should be particularly penalized.
The Basel III agreement was reached in Switzerland by central bank governors and top supervisors from 27 countries, after a year of horse-trading and lobbying that involved banks and governments seeking to protect their national interests.
Leaders of the Group of 20 rich and big emerging economies blamed the global credit crisis partly on risky trading by banks and demanded tougher bank capital rules.
They are set to endorse Sunday's deal when they meet in Seoul in November and consider the FSB's recommendations for systemically important banks.
So far there is no consensus at the G20 to back a mandatory surcharge on top of the Basel III requirements.
"These institutions need greater loss absorbing capacity," Draghi said.
(Additional reporting by Maria Aspan, Rachel Armstrong, Lionel Laurent, Ian Simpson, Narayanan Somasundaram, Denny Thomas, Ben Lim, Aileen Wang and Taiga Uranaka; Editing by Mike Peacock, Chizu Nomiyama and Matthew Lewis)