Top banks have $155 billion capital shortfall, most in Europe

Wed Sep 25, 2013 3:06pm EDT
 
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Huw Jones

LONDON (Reuters) - The world's biggest banks would need to boost their capital by 115 billion euros ($155 billion) to comply with tougher rules and more than 60 percent of that shortfall is in Europe, where lenders have been slower to strengthen.

The capital shortfall fell by 83 billion euros during the second half of last year as banks retained more of their profits and raised capital, although the pace of improvement was not as quick in Europe as elsewhere.

The Basel Committee of global regulators said on Wednesday the shortfall at top international banks was based on a target to hold a minimum core capital level of 7 percent, plus capital surcharges required for the biggest banks. Its finding was based on their balance sheets at the end of last year.

Some 70 billion euros of the shortfall was at banks in the European Union, representing 61 percent of the global deficit. The shortfall at EU banks was cut by 29 billion euros in the second half of last year, according to a European Banking Authority (EBA) estimate.

Markets and regulators have been putting pressure on banks to move early to comply with the global Basel III accord being phased in, to dispel any doubts about their ability to thrive and encourage investors to buy their bonds and shares.

Basel roughly triples how much capital banks must hold compared with before the financial crisis, when many undercapitalized lenders had to be rescued by taxpayers.

It requires banks to have a core capital buffer equivalent to at least 7 percent of their assets on a risk-weighted basis by January 2019.

The Basel Committee said the group of 101 global banks in its sample made after-tax profits prior to distributions of 419 billion euros last year.   Continued...

 
A woman uses an ATM at a HSBC bank in the City of London February 28, 2011. REUTERS/Andrew Winning