Europe’s banks build capital buffers before stress tests

Tim Wallace
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EUROPE’S banks have improved their capital positions rapidly in advance of next year’s stress tests, European Banking Authority (EBA) numbers showed yesterday.

The EU’s biggest 64 banks increased their capital buffers by €80bn (£67.5bn) and slashed risk-weighted assets by €817bn between December 2011 and June 2013.

The effort increased their core tier one capital ratios from 10 per cent to 11.7 per cent.

And in the final six months alone the ratio jumped from 11.2 per cent to 11.7 per cent, indicating renewed efforts to improve the position.

The aim of this part of the exercise is to make sure each bank is being measured on an even footing with the others around Europe, so the stress test will be carried out on a level playing field.

The study shows the UK’s biggest four banks have an average core tier one ratio of 11.7 per cent, exactly in line with the UK average. By contrast German lenders are at 12.8 per cent and France’s 11.1 per cent.