* Salameh says widening pound/dollar band not an option
* Salameh says Lebanon won't trade gold reserves
* Salameh says won't cut dollar fx reserves
* Confident Debt-to-GDP ratio at 140 percent in 2010
* Studying idea to lift banks' reserve requirements
By Yara Bayoumy and Dominic Evans
BEIRUT, Oct 26 (Reuters) - Lebanon's central bank has no intention of widening the band within which the Lebanese pound trades against the dollar because it would encourage speculation and hurt price stability, Governor Riad Salameh said on Tuesday.
Political tensions this month increased demand for the dollar, pushing it towards the outer end of the band at 1,514 Lebanese pounds, prompting the central bank to intervene and sell dollars for the first time in two years, bankers said.
Salameh said the central bank would continue its policy of allowing the pound to fluctuate against the dollar in a tight range between 1,501 pounds and 1,514 pounds.
"We shall not change the range I have talked about because we believe that it will encourage speculation which can hurt the stability of prices ... This could give a wrong message to the market because it has been accustomed to this range for many years now," Salameh told Reuters.
"... We know that in Lebanon a tight range is required to keep things in order."
"Whenever the market reaches 1,514, it should be expected that we would be there to offer dollars and shall not allow the dollar to go over this price," he said.
The central bank intervened at the height of instability two years ago, when street fights between supporters of Shi'ite Hezbollah and Sunni followers of now Prime Minister Saad al-Hariri nearly deteriorated into full-blown civil war.
Political tensions revived after reports emerged that indictments may be issued at the end of this year or early next year against Hezbollah members for their alleged involvement in the 2005 assassination of former prime minister Rafik al-Hariri.
ANCHOR FOR CONFIDENCE
"Our statement is clear, we are going to maintain the stability of the Lebanese pound because this is important as an anchor for confidence, for price stability and to preserve the purchasing power of the Lebanese," he said.
"We have shown in very difficult situations that we were able to maintain a stable currency and therefore we see the Lebanese pound as being stable in the future."
Salameh said the central bank had $31 billion in liquid foreign assets, with foreign reserves divided between dollars and euros in a ratio of 70:30, with no plans to change that formula despite recent pressures on the dollar.
Salameh said Lebanon also has no intention of buying or selling gold, which it has in reserves worth nearly $12 billion.
The central bank's stocks made it the second biggest holder of gold in the Middle East and North Africa, and maintaining those reserves was important to preserving confidence in the Lebanese pound, Salameh said.
BEYOND BASEL III
The governor said the central bank plans to set Lebanese banks a much higher target for top quality capital reserves than the levels agreed by international regulators in response to the financial crisis.
The banks should hold 10 percent of Tier 1 capital, significantly higher than the 7 percent which Salameh said was set out in the Basel III package.
Salameh also said he was confident Lebanon, one of the most highly indebted countries in the world, would reduce its debt-to-GDP ratio to 140 percent by the end of the year from about 147 percent in 2009.
"With the present rate of growth and the present rate of inflation, yes we are confident that this will happen."
He said Lebanon's economy is expected to grow by between 7 percent and 8 percent this year, matching similar levels in 2008 and 2009, driven by strong consumer confidence and the business community was indicating 2011 would be a "good year".
Salameh said he hoped international ratings agencies would lift the country's rating to BBB from B -- its rating from Standard & Poor's and Fitch -- in the future.
"If you look at our performance in the markets, in terms of credit default swaps or even interest rate levels ... we are being priced by the market at levels of countries that are rated BBB." (Editing by Susan Fenton)