Europe’s banks hit their capital buffer targets

Tim Wallace
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Andrew Bailey oversees banks
Europe's biggest banks were closing in on their capital targets at the end of last year, global regulators at the Basel Committee said yesterday, indicating the lenders appear to have met the goals by now.

Now the banks have built up the vital buffers, they should be able to dedicate more resources to lending and supporting the economy, rather than rebuilding their strength from the financial crisis.

At the end of December of last year, the new figures show that the biggest 102 banks were just €15bn (£12bn) away from the target.

That extra €15bn will put their buffers at a minimum of seven per cent of their risk-adjusted assets.

It compares with a €57.5bn hole the banks had to fill just six months earlier.

And the next tier down of 125 slightly smal­ler lend­ers has a capital cap of just €2bn to hit its less strenuous target of 4.5 per cent buffers, down from a €10.4bn gap in June 2013.

And to hit the seven per cent buffer they need another €9.4bn, down from the €18.3bn they required six months earlier.

There has been a renewed sense of urgency in European banks’ drive to build up buffers as they face regulatory stress tests this autumn.

Banks will have to submit their books to be subjected to a range of hypothetical credit losses, so regulators can see how strong the lenders will be after another economic crunch.

British banks – which are under the scrutiny of Prud­ential Regulation Auth­ority boss Andrew Bailey – face those tests, as well as UK specific ones that will focus on the impact of a hypothetical house price crash.