Weakest banks’ capital buffers getting worse

Tim Wallace
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THE WEAKEST of the world’s biggest banks have too little capital to stay safe and are getting further away from their targets, an international group of central bankers warned yesterday.

Overall the biggest 102 international banks are getting closer to their targets, with the vast majority either above their target or very close to it.

They are targetting capital buffers amounting to seven per cent of their risk-weighted assets, and by June 2013 were just €57.5bn away – halving the €115bn gap seen six months earlier.

However, a handful of those 102 are well short of the target, not even meeting the easier 4.5 per cent goal.

Those weak lenders got further away from their target in the six-month period – the shortfall below that 4.5 per cent increased from €2.2bn to €3.3bn.

The average core tier one capital ratio under the Basel III rules is 9.5 per cent for the biggest banks and 9.1 per cent for the next tier of international lenders, both well in excess of the seven per cent target – though some have additional buffers of up to 2.5 per cent to cover the risks they pose as global systemically important banks.