Biggest lenders close in on new capital targets

Tim Wallace
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THE WORLD’S largest banks took a €111.5bn (£89.1bn) step closer to hitting capital ratio targets in the second half of last year, according to new figures released by the Basel Committee on Banking Supervision yesterday.

The study looked at banks’ capital levels as of 31 December 2011, and applied incoming Basel III rules to see how much more they need to raise to hit the seven per cent ratio required in future.

Overall, the world’s biggest 102 banks would be €374.1bn short on core capital if those rules were in place at the start of this year, the study found.

That is an improvement of €111.5bn, or 23 per cent, compared with capital levels six months earlier.

The seven per cent target is comprised of a 4.5 per cent bare minimum, and an additional capital conservation buffer.

The report found 71 per cent hold core capital of above seven per cent, 24 per cent hold between 4.5 per cent and seven per cent, while five per cent do not meet that bottom level.

In total banks are just €11.9bn short of the lower 4.5 per cent requirement, an improvement of €26.9bn or 69.3 per cent on the previous study.

Meanwhile the 107 smaller banks studied – those which do not have core tier one capital in excess of €3bn or are not internationally active – need another €7.6bn to hit the minimum 4.5 per cent level, and €21.7bn to reach the seven per cent ratio.