LONDON: Five British banks, including Barclays and bailed-out pair RBS and Lloyds, must together find an extra £13.4bn to meet international rules on amassing sufficient capital cushions against the threat of future financial crises, the Bank of England said yesterday.
The BoE’s banking supervision arm said the five lenders, comprising also The Co-operative Bank and Nationwide Building Society, faced a total shortfall of £27.1 billion as of the end of 2012.
The banks already had plans in place to raise £13.7bn of capital — but needed to find another £13.4bn via asset disposals and internal restructuring, the Prudential Regulation Authority (PRA) said in a statement.
This would allow the lenders to have a capital cushion equivalent to at least 7 percent of the risks being carried by a bank, as required by so-called Basel Three international rules created in response to the 2008 financial crisis. The EU supervisor, the European Banking Authority, is requiring core capital to amount to 9 percent of the risks within the region.
Out of the extra £13.4bn needed, Barclays must raise an extra £1.7bn, while bailed-out Lloyds Banking Group (LBG) and Royal Bank of Scotland (RBS) require £7bn and £3.2bn respectively, the PRA added.
The three lenders each said in response that they were on course to raise sufficient new capital via restructuring and disposals, and would not need to issue shares.
The Co-operative Bank, a mutual owned by its customers, had earlier this week already laid out plans to increase its capital cushion by £1.5bn following the regulator’s review.
The PRA added that the British arms of HSBC, Santander and Standard Chartered banks all had surplus capital at the end of 2012 and therefore did not need to take action.
Its announcement came one day after British finance minister George Osborne ordered a review into whether state-rescued Royal Bank of Scotland should be split into ‘good’ and ‘bad’ banks, with the latter housing written-off assets, as part of the government’s plan to return RBS to the private sector.
Chancellor of the Exchequer Osborne had added that the coalition government was also considering options for selling its stake in LBG, which like RBS won a massive state bailout following the 2008 global financial crisis.
RBS, 81-percent owned by the government, has been left shellshocked after chief executive Stephen Hester last week announced that he was stepping down after five years in the role.
AFP
