Crackdown on risk hits Barclays, Deutsche

Tue Jul 30, 2013 3:06pm EDT
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By Steve Slater and Edward Taylor

LONDON/FRANKFURT (Reuters) - A $9 billion rights issue and a fresh purge of assets are among the measures Britain's Barclays and Germany's Deutsche Bank announced on Tuesday to meet tougher rules on risk, raising concern among investors that regulators will push other European banks into similar action.

Unlike their U.S. rivals, which were quickly restructured and recapitalized in the heat of the financial crisis, Europe's banks are still trying to extricate themselves from the legacy of 2007-09, with regulators in Britain and on the continent worried that some of them are still too big to fail.

"If Barclays needs to raise that much capital, and it was relatively well capitalized by European standards, it suggests we've got a long way to go in Europe," said the head of equities at one UK fund manager.

"We'll see this creep in Europe, moving the bar higher and higher to get to where the regulators want to go, and we've still got a long way to go in terms of capital raising."

Barclays bore the brunt of a surprise new British curb on banks' risk exposure, requiring it to raise an extra 12.8 billion pounds of capital in the next year.

To meet the new target, Britain's third-largest bank by market value said it would tap shareholders for 5.8 billion pounds, shrink its loan book by 65-80 billion pounds and sell 2 billion pounds' worth of bonds, sending its shares sliding over 7 percent.

Tougher rules on risk can discourage lending, and Britain's business minister accused the Bank of England last week of holding back economic recovery by imposing higher capital requirements.

Standard Life, one of the biggest investors in Barclays and the UK stock market, criticized regulators for a "lack of stability or consistency".   Continued...

Raindrops are seen on the logo of a Barclays bank in central London July 30, 2013. REUTERS/Toby Melville