* BoE's bank recap plans to be completed this month
* Bailey says RBS, Lloyds not getting off scot free
* Bailey says may need to check leverage ratios at banks
By Huw Jones and David Milliken
LONDON, June 3 Work on mapping out how Britain's banks must plug a 25 billion pound capital hole will not be hurried but should be done within weeks, Britain's top banking regulator said on Monday.
Andrew Bailey, chief executive of the Prudential Regulation Authority (PRA) at the Bank of England, also sought to head off critics who accuse him of being too slow, opaque, and allowing lenders to avoid raising fresh capital.
"I make no apology for doing this quietly. I am much more interested in the outcomes than the running commentary," Bailey told the Society of Business Economists' annual dinner.
"As we near the end of a timely but not rushed process, we will be communicating in the next few weeks the headline results of this work," added Bailey. The work is expected to be completed this month.
Bailey also said latest lending figures from banks using the central bank's Funding for Lending Scheme (FLS), offering cheap finance if banks maintain or increase lending to home-buyers and businesses, were better than they appeared at first glance.
"Net lending in the UK was broadly flat in the second half of last year, and is expected to be up modestly in the remainder of this year. This compares with an expectation prior to the launch of the Funding for Lending Scheme that net lending would decline over last year and this," he said.
The FLS data showed that net lending has fallen by 1.79 billion pounds since the launch of the scheme, despite banks drawing down more than 16 billion pounds of cheap funding.
Last month the FLS was extended to give banks greater incentives to lend to small businesses, and Bailey said there was a particular problem for some firms as banks switched from lending based on a firm's real estate assets to lending based on estimated future cash flows.
"As well as our part in creating the right incentives for credit to be on offer, there is a need to ... (consider) credit assessments, and the issue of whether some types of commercial property are acting as a restraint on access to finance."
Banks have argued they cannot build up capital and lend more to the sluggish UK economy but Bailey said additional capital supported lending by making the banks stronger.
"Equity finances the provision of loans to households and companies," he said.
The PRA has translated the 25 billion pound capital gap identified earlier this year into firm-by-firm numbers, but it has not made these public.
This follows a recommendation in March by the central bank's Financial Policy Committee for banks to plug shortfalls by the end of this year. Existing plans, such as selling off assets, already covered half the deficit.
Britain is keen for banks to stand on their own feet after its taxpayers had to shore up the sector and take stakes in Lloyds and RBS.
The aim is for eight banks - Lloyds, RBS, HSBC, Barclays, Nationwide, Santander UK, Co-op and Standard Chartered to have core capital equivalent to 7 percent of their risk-weighted assets.
HSBC, Standard Chartered and Santander are not expected to need more capital to meet PRA requirements, while any shortfalls at Barclays and Nationwide should be easily filled. The Co-op remains as having to take more significant action.
Hitting the 7 percent ratio would mean the lenders meet the global Basel III minimum rules five years ahead of time.
The PRA has endorsed plans from RBS and Lloyds, causing surprise that the two were not required to raise new capital. Bailey said that selling assets was just as acceptable for boosting capital levels, as the two banks are doing.