The Australian Prudential Regulation Authority has refused to relax a number of rules that will apply under the Basel 2 regime for the calculation of bank capital from next year, at least as they apply to those banks operating under the "standardised" variant, which is most banks.One concession APRA did allow in a discussion paper published yesterday relates to the treatment of residential loans in arrears. APRA had said loans in arrears by 90 days or more should lose the concessional risk weighting (which will be less than 50 per cent for most mortgages) once the loan is more than three months behind.APRA will now allow banks to apply the lower risk weight on such loans provided the loan has mortgage insurance. The caveat, however, is that such loans must continue to have mortgage insurance and that the total of such loans covered by each insurer does not exceed the bank's large exposure limit. Most likely it would take a particularly severe recession for that to occur.APRA held its ground on some other areas of minor controversy.These include the regulator's plan to require banks to adopt a 100 per cent risk weight on "other retail" loans such as credit cards. The Basel 2 template suggests these loans be weighted at 75 per cent - and foreign-owned and foreign-supervised lenders such as HBOS and Citibank may enjoy a commercial advantage from such a ruling.APRA also said it would stick by a risk-weighting of 300 per cent for bank holdings of listed equities and 400 per cent for unlisted equities, and thus giving short shrift to bank arguments that this rule would stymie venture capital transactions and strategic investments.