Barclays in need of €12bn capital to meet tough new regulations

BARCLAYS will need to raise around €12bn (£10.3bn) of new capital over the next five years in order to meet tough new European regulations, according to research by Royal Bank of Scotland (RBS).

The report lays bare the scale of the deleveraging required to meet Basel III requirements and concludes Eurozone banks will have to cut €3.2 trillion more assets by 2018. More than 80 per cent of this burden will fall on small lenders.

“[Eurozone banks] are still too large, at €32tn, over three times the size of the economy. They need to be leaner and to raise more capital,” the RBS analysts said.

Deutsche Bank and Credit Agricole join Barclays as the major banks singled out for having balance sheets that require substantial improvements.

Banks can improve balance sheets by lending less money and selling off assets. Last month Barclays said it would seek to reduce its leverage by £65bn-£80bn by next June.

The report warns this will have an effect on the real economy: “Public support programmes can partly offset the decline in bank lending, but eventually Europe’s banks will have to get back on their feet.”