Lloyds Banking Group expects UK regulators to require banks to hold a common equity Tier 1 requirement of around 11 per cent under normal market conditions, chief executive Antonio Horta-Osorio told a conference in London.

The bank, in which the British government has a 33 per cent stake, needs to convince regulators it has sufficient capital to start paying dividends again to boost the prospects of the finance ministry being able to sell off some of its holding to retail investors.

Lloyds, Britain’s biggest retail bank by market share, said in February that its core capital – a measure of financial strength – increased to 10.3 per cent last year.

Horta-Osorio said capital requirements in Europe and Britain were becoming better defined. Up to now, the Prudential Regulation Authority has set a minimum requirement of 7 per cent but investors have generally expected a ratio of 10 per cent.

Lloyds has said it will approach the regulator in the second half of 2014 about starting to pay dividends again for the first time since it received a £20.5 billion government bailout in the 2008-09 financial crisis.

A Prudential Regulation Authority spokesman was not immediately available to comment.

Horta-Osorio also said the bank was looking to expand in pensions, where it has a 10 per cent market share.

Finance Minister George Osborne unveiled a far-reaching shake-up of the pensions system in his annual budget last week aimed at boosting choice.

Speaking at the same Morgan Stanley conference, Royal Bank of Scotland’s chief executive Ross McEwan reiterated a target for its Irish business Ulster Bank to move back into profitability in 2014.