EU makes new bid to end deadlock on bank capital BRUSSELS (Reuters) - EU countries are making a fresh attempt to break the deadlock over new bank capital rules and ministers are due to meet on May 2, officials and diplomats said, accelerating efforts to find agreement on measures crucial for lending and the economy. The European Commission has proposed new standards for the amount of capital banks across the 27-state European Union must hold to cover risks. But Britain is demanding the flexibility to impose higher levels of capital on banks if necessary, putting it at loggerheads with Germany and France, which favor a uniform standard across Europe. Clarifying the precise rules on capital, almost five years after the start of the financial crisis that toppled lenders, would remove some uncertainty for banks, already nervous about lending as Europe slides into recession. But in recent weeks, the complex debate has become bogged down in a dispute that has pitted not only Europe's most powerful countries against one another but also some of the region's top institutions, including the European Central Bank. Time is running out for the EU to finalize its rules that will reshape post-crisis banking in the decades to come. World leaders have agreed to start phasing in global bank capital rules, known as Basel III, from next year and the EU wants to finalize its framework within months. Now Denmark, which as the current holder of the EU presidency and responsible for brokering an agreement on such issues, has taken the unusual step of calling an extra meeting of finance ministers in Brussels on May 2 to break the logjam. "They have more or less exhausted how far they can get at the working group level," said one Danish diplomat, talking on condition of anonymity. It is political decisions that are needed. Another EU diplomat confirmed the May 2 date. Outlining the chief division, one European official said: "The UK would like to push its comparative advantage that its banks are better capitalized by securing the possibility to impose more stringent capital rules. Others want to maintain a level playing field in the EU. Germany is with France on this. Critics say that allowing some countries to go it alone with stricter standards would upset the EU's single market - French or German corporates, for example, could shift deposits to a British bank if its capital cushion was higher. But Britain, whose banks are generally better capitalized than their rivals in France and Germany, is insisting on flexibility. "It's vital that legislation properly implements international standards in the EU, strengthens the European banking system and safeguards the stability of the European economy," said one British government source. At the heart of the dispute, far more than the technicalities of bank balance sheets, is a struggle for influence and power in a Europe shaken by the worst financial crisis in a generation. Britain has been fighting to maintain its autonomy to regulate the City of London, Europe's financial capital, as EU countries move to centralize the supervision and regulation of banking and finance. Institutions such as the ECB, which has pumped in 1 trillion euros ($1.33 trillion) of three-year loans to prop up banks in the euro zone, also wants to maintain its influence. Officials in Brussels are considering allowing countries like Britain flexibility to impose higher standards of capital on their banks but want a European authority such as the EU's executive, the European Commission, to keep tabs on such moves. In a letter to finance ministers and the European Commission earlier this week, Mario Draghi the President of the European Central Bank, said a Frankfurt-based risk-monitoring body, that is dominated by the ECB, should have that job. "Tightening calibrations imposes short-term costs also on initiating Member States," he wrote. That calls for... exchange of information and coordination. "Competence for this coordination lies with the ESRB (European Systemic Risk Board) as the Union's macro-prudential overseer," said Draghi who also chairs the body. One European official said the meeting in May could concentrate the minds of finance ministers, who gathered last weekend in Copenhagen. Bank capital received little attention as countries were preoccupied with separate disputes about introducing a tax on financial transactions and how to regulate credit rating agencies. Writing By John O'Donnell; additional reporting by Huw Jones in London; Editing by Mike Nesbit