March 6, 2014 / 10:28 AM / 5 years ago

Top banks seen meeting capital rules well before deadline

LONDON (Reuters) - The world’s top banks have already added most of the capital they need to meet new solvency rules in full, five years ahead of a 2019 deadline set by regulators, global banking supervisors said on Thursday.

Market and regulatory pressure has meant banks moved early to build up their capital buffers to dispel doubts about their health, with European banks in particular topping up on capital to ensure they pass a review of their assets and a stress test this year.

The Basel Committee, made up of regulators from nearly 30 countries, said the world’s top 102 banks had a combined shortfall of 57.5 billion euros by June 2013, half of the 115 billion euro shortfall seen at the end of 2012.

The committee’s new, tougher capital rules known as Basel III, the core global regulatory response to the 2007-09 financial crisis, are being phased in and must be complied with in full by the start of 2019.

The remaining hole is modest when compared with total after-tax profits of the 102 banks, which totalled 456 billion euros for the year to June 30, 2013.

The average core capital ratio, the main benchmark for measuring a bank’s capital buffer, was 9.5 percent for the top 102 banks surveyed by the Basel Committee.

Under Basel III, all banks must have a core ratio of 7 percent by the start of 2019, with the very biggest banks holding an extra buffer of up to 2.5 percent.

The next tier down of 125 banks had a combined shortfall of 27.7 billion euros, an increase of 2.1 billion euros from the end of 2012, caused by a small number of lenders, the committee said in a statement.

The average core ratio of the second-tier banks was 9.1 percent at the end of June.

The Basel rules also introduce new requirements for lenders to hold separate buffers of cash and bonds, known as the liquidity coverage ratio (LCR), to help them weather short-term funding crises.

It is being phased in between 2015 and the start of 2019.

The Basel Committee said the average LCR for the top banks at the end of last June was 114 percent, down from 119 percent six months earlier.

This means that lenders exceed their LCR requirements.

Britain has told lenders they can scale back their excess liquidity buffer if they use the freed-up funds to aid economic growth through lending to small companies.

Editing by Steve Slater and Tom Pfeiffer

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